A look at the day ahead in European and global markets by Wayne Cole.
The early action Monday was in the currency, as the dollar took a hit after a new poll in Iowa showed Democratic presidential candidate Kamala Harris leading Republican Donald Trump. That was enough to send the dollar down 0.9% against the yen and 0.6% against the euro, while the trade-sensitive Australian rebounded 0.8%.
Analysts tend to assume that Trump’s policies on immigration, tariffs and tax cuts would put much more upward pressure on the US dollar and interest rates than a Harris victory.
Of particular note was the Des Moines Register/Mediacom Iowa Poll, which surprised everyone by showing Harris three points ahead of Trump in the state, a big shift from a few weeks ago. This poll has a very good track record and is considered an indicator of voting in the swing states.
“Since last week, Harris has seen a rise in the polls, highlighted by Iowa’s Selzer Poll, where some are using the performance of the Blue Wall battleground states (Michigan, Pennsylvania and Wisconsin) as a benchmark,” JPMorgan said in a note. .
Gambling site PredictIT showed Harris 53 cents to Trump at 51 cents – what investors are willing to bet for a chance to win $1 – compared with 42 cents to 61 cents a week ago.
The poll average is still too close and it is entirely possible that the outcome of Wednesday’s vote will not yet be known. For example, in 2020, Pennsylvania was not convened until the Saturday after the election. There may also be legal challenges to the results, which could drag on for weeks.
Markets are betting the Federal Reserve will continue cutting rates on Thursday regardless of the outcome, with futures implying a 98% chance of 25 basis points. They also estimate an 80% probability of another quarter point in December, although that could easily change depending on who becomes president-elect.
The Bank of England is also expected to cut by a quarter of a percentage point on Thursday, while the Riksbank is expected to ease by 50 basis points. Norges Bank and the Reserve Bank of Australia (RBA) are on hold this week.
The other market mover on Monday was oil, which rebounded about 1.4% after OPEC+ said on Sunday it would delay a planned production increase in December by a month. This was the second time the country has made a 2.2 million barrel per day cut and only shows how concerned they are about global demand.
Asia was particularly weak, with crude oil imports falling 200,000 barrels per day in the first 10 months of the year compared to the same period in 2023, according to LSEG data.
Key developments that could impact the markets on Monday:
