Equities in limbo as traders await election steer

by Andre Janse van Vuuren and Julien Ponthus

The dollar and US equity futures held steady ahead of the start of voting in a tight race between Donald Trump and Kamala Harris for the US presidency.

Traders are taking a cautious approach as polling stations are set to open Tuesday after one of the most tumultous and dramatic presidential campaigns in modern history. With polls suggesting a photo-finish result, the likelihood of a disputed result means that the vote count could eventually drag on for days or even weeks.

An index of the greenback was little changed after falling by the most in more than a month on Monday as investors walked back bets on Trump winning the election. Futures contracts for the S&P 500 traded flat while Europe’s benchmark stock index extended losses. Yields on 10-year US Treasuries advanced three basis points.

“What you can see across markets now is that no one is ready to take clear investment positions on the election,” said Alexandre Hezez, chief investment officer at Groupe Banque Richelieu in Paris. “The uncertainty is palpable across all asset classes, the dollar, bonds and equities. Even hedging is a complicated trade at the moment.”

A coin-toss US election is spurring some hedge funds to favor currency options that will gain from a weaker dollar should Harris win the presidency. 

“The US dollar is probably the cleanest expression, the most obvious expression for this week,” Chris Weston, Pepperstone Group’s head of research, told Bloomberg TV. A Harris victory coupled with a split Congress warrants selling of the US currency, while “if we get a Trump win you’ll probably see a little bit of a pop in the dollar.”

There are additional catalysts likely to move the market this week. Election Day will quickly be followed by Thursday’s Federal Reserve’s decision and Jerome Powell’s press conference, where he’ll give details on the central bank’s interest-rate path. A big chunk of US firms are due to report earnings.

Key events this week:

• US trade, ISM Services index, Tuesday
• US Presidential Election, Tuesday
• Brazil rate decision, Wednesday
• New Zealand unemployment, Wednesday
• Poland rate decision, Wednesday
• Taiwan CPI, Wednesday
• Vietnam CPI, trade, industrial production, Wednesday
• ECB President Christine Lagarde speaks, Wednesday
• China trade, forex reserves, Thursday
• Eurozone retail sales, Thursday
• Mexico CPI, Thursday
• Norway rate decision, Thursday
• Peru rate decision, Thursday
• Sweden rate decision, CPI, Thursday
• UK BOE rate decision, Thursday
• US Fed rate decision, initial jobless claims, productivity, Thursday
• Brazil inflation, Friday
• Canada employment, Friday
• Chile CPI, Friday
• Taiwan trade, Friday
• US University of Michigan consumer sentiment, Friday
• Fed Governor Michelle Bowman speaks, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 fell 0.1% as of 8:29 a.m. London time
• S&P 500 futures were little changed
• Nasdaq 100 futures rose 0.1%
• Futures on the Dow Jones Industrial Average were little changed
• The MSCI Asia Pacific Index rose 0.7%
• The MSCI Emerging Markets Index rose 0.7%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro rose 0.1% to $1.0889
• The Japanese yen was little changed at 152.23 per dollar
• The offshore yuan was little changed at 7.1134 per dollar
• The British pound rose 0.2% to $1.2979

Cryptocurrencies

• Bitcoin rose 2.6% to $68,797.6
• Ether rose 2.7% to $2,435.18

Bonds

• The yield on 10-year Treasuries advanced three basis points to 4.31%
• Germany’s 10-year yield advanced three basis points to 2.42%
• Britain’s 10-year yield advanced three basis points to 4.49%

Commodities

• Brent crude rose 0.2% to $75.23 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

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