2024-11-05 06:04

Dollar and bonds set to react to US vote VIX 'fear index' at low ebb USD/CNH implied volatility near record high NEW YORK, Nov 5 (Reuters) - World stocks rose and Treasury yields retreated from early highs on Tuesday as markets awaited early indications of the outcome of a knife-edge U.S. presidential election, with only currency markets showing some jitters. Overnight implied volatility options for euro/dollar spiked to the highest level since November 2016, as did those for the dollar-Mexican peso pair , in recognition that the latter could be hard hit by protectionist policies if Republican Donald Trump defeats Democrat Kamala Harris. The VIX index (.VIX) , opens new tab of U.S. stock volatility, known as Wall Street's fear gauge, hovered at 20.5, down 7% from Monday but up from 15 in September. That said, it remains at half the level experienced in the 2020 presidential election in a sign that markets remained relatively sanguine. "I'm hopeful that we'll see clues pretty early. I believe polls close in Georgia and North Carolina at 7:30 p.m. (ET/0030 GMT on Wednesday), and both are states that count quickly," Christy Setzer, a Democrat strategist, said in the Reuters Global Markets Forum. "So much of their states' votes are already in, so there's a smaller amount of Election Day voting." MSCI's gauge of stocks across the globe (.MIWD00000PUS) , opens new tab climbed 1.1%. On Wall Street, the S&P 500 Index (.SPX) , opens new tab rose 1.2%, the Dow Jones Industrial Average (.DJI) , opens new tab added 1%, and the Nasdaq Composite (.IXIC) , opens new tab jumped 1.4%. "The polls remain neck and neck even as some recent polling has suggested that Harris has gained the upper hand," analysts at TD Securities said. "Prediction markets have swung wildly on the updated polling, but a Red Wave (favoring Republicans) remains the most likely outcome priced into markets followed by Democratic President and split Congress." The 10-year Treasury yield pared earlier gains and slipped to 4.2888%, retreating from a four-month-high struck last week. Yields spiked higher earlier even as investors widely expect the U.S. Federal Reserve to cut interest rates by 25 basis points when policymakers meet this week. The jump in yields followed data from the Institute for Supply Management that showed U.S. services sector activity unexpectedly accelerated in October to a more-than-two-year high, as employment strengthened. The two-year Treasury yield added 2 bps to 4.1972%, also near a three-month-high hit last week. "Investors are braced for turbulence in the Treasury market, even allowing for the big moves that we've already seen in it recently," said John Higgins, chief markets economist at Capital Economics. The choppiness is not surprising, Higgins said, given "the contrast in the protagonists' policy platforms." In general, investors have interpreted Trump's trade policies to be more protectionist and inflationary. The 10-year Treasury yield has climbed 63 basis points since the Federal Reserve cut interest rates by 50 basis points on Sept. 18. Europe's benchmark STOXX index (.STOXX) , opens new tab was flat, while MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) , opens new tab rose 0.9%. Currencies, which unlike shares trade around the clock, saw more action, albeit offering only scattered and contradictory indications of which candidate investors were betting on. The dollar, which eased as traders made final tweaks to positions, bought 151.58 yen and changed hands at $1.0285 per euro . "They've priced what they think is price-able and that's that," said Westpac strategist Imre Speizer, adding that a clear win for Trump would lift the dollar, while a win for Harris would push it a little lower. Bitcoin added 3.3% to about $70,077, with Trump viewed by analysts as enacting more favorable policies for cryptocurrencies than Harris. "Ultimately the U.S. election comes down to this - whether the U.S. electorate wants to vote for economic policy continuity, institutional stability and liberal democracy (Harris) or radical trade policy, a further retreat for globalization and strongman democracy (Trump)," J.P. Morgan analysts said in a note. "In short, a vote for stability or change." BRACED China is seen on the front line of tariff risk, and its currency in particular is trading on tenterhooks with implied volatility against the dollar around record highs. The yuan hovered at 7.1047 per dollar, while Chinese stock markets surged to almost one-month highs as investors expect a meeting of top policymakers in Beijing this week to approve local government debt refinancing and spending. China's blue chip CSI300 (.CSI300) , opens new tab jumped 2.5% and Hong Kong's Hang Seng (.HSI) , opens new tab rose 2.1%. The Australian dollar barely reacted after the central bank held rates, as expected, with all eyes on the U.S. election, and the Aussie was last marginally firmer at $0.6614. Euro zone bond yields edged up, with Germany's 10-year bond yield climbing nearly 4 basis points to 2.431%, a little below last week's three-month high of 2.447%. Oil held sharp overnight gains on delays to producers' plans for increased output, leaving benchmark Brent crude futures at $75.62 a barrel after a 3% rise on Monday. Sign up here. https://www.reuters.com/markets/currencies/global-markets-wrapup-1-2024-11-05/

2024-11-05 05:40

Gold has risen around 33% this year Gold could benefit from uncertainty if U.S. election result delayed, Commerzbank says Markets anticipate Fed will cut rates by 25 bps on Thursday Bullion could hit $2,800 after US election, analyst says Nov 5 (Reuters) - Gold prices edged up on Tuesday as investors braced for political tensions after opinion polls showed Donald Trump and Kamala Harris are neck and neck in the U.S. presidential election where chances of a contested result are high. Spot gold gained 0.2% to $2,740.96 an ounce by 01:54 p.m. ET (1852 GMT). U.S. gold futures settled 0.1% higher at $2,749.70. Gold is supported by "the uncertainty of the elections. Part of it is what happens if things don't go so smooth, part of it is the possibility of tariffs, some kind of economic changes," said Daniel Pavilonis, senior market strategist at RJO Futures. With a dead heat between Republican former President Trump and Democratic Vice President Harris and control of the U.S. Congress also at stake, investors are particularly nervy about an unclear or contested result, especially if it fuels unrest. "Should the election result be uncertain for days or even weeks, gold would benefit from the resulting uncertainty," Commerzbank said in a note. Trump has repeatedly said any defeat could only stem from widespread fraud, echoing his false claims from 2020. The winner may not be known for days if the margins in key states are as slim as expected. Gold should ultimately reach $2,800 "once the dust settles" after the election, Exinity Group Chief Market Analyst Han Tan said. Elsewhere, markets widely anticipate a quarter-point cut from the Federal Reserve on Thursday, a further reduction to U.S. interest rates this year after a big cut in September. Bullion is traditionally seen as a hedge against economic and political uncertainty, and tends to thrive when interest rates are low. This has helped the metal rise nearly 33% so far this year. Spot silver rose 0.4% to $32.59 an ounce, platinum added 1.5% to $998.35 and palladium was down 0.2% at $1,072.50. A private sector survey in top metals consumer China showed services activity expanded at its fastest pace in three months in October. Sign up here. https://www.reuters.com/markets/commodities/gold-sluggish-ahead-us-election-fed-meeting-2024-11-05/

2024-11-05 05:32

A look at the day ahead in European and global markets from Tom Westbrook At last Election Day is here, ending an acrimonious campaign roiled by assassination attempts on Donald Trump and the swap of Kamala Harris for Joe Biden as the Democratic candidate. Outwardly, markets gave the appearance of steadiness in the final stretch and dealing desks reported that investors have drawn down risk and settled in to wait and see. In the eerie calm, Australia's central bank left rates on hold, as expected, and Knight's Choice won the Melbourne Cup. Oil has been the main market mover in recent days, gaining nearly 3% on Monday after OPEC+ said it would delay a planned output hike for a second time. U.S. polling points to an incredibly close contest and gambling markets have tightened odds in recent days, prompting a bit of a trim for wagers in financial markets on a Trump victory or a Republican sweep of Congress and the White House. Strategists see the dollar rising if Trump wins and falling if he doesn't, except against bitcoin, which is expected to go up on a Trump win since he's seen as a softer touch on crypto regulation. Beneath the surface, options implied volatility for the offshore yuan against the dollar was at record highs, illustrating the tension and nerves about what another protectionist shift from the U.S. would mean for world trade. When results roll in, the focus will be on the battleground states of Georgia, North Carolina, Pennsylvania, Michigan, Arizona, Wisconsin and Nevada. Polls close in Georgia at midnight GMT. A winner may not be known for days and Trump has signalled that he will attempt to fight any defeat, as he did in 2020. Key developments that could influence markets on Tuesday: - U.S. election Sign up here. https://www.reuters.com/markets/europe/global-markets-view-europe-2024-11-05/

2024-11-05 04:37

MUMBAI, Nov 5 (Reuters) - The Indian rupee was nearly unchanged on Tuesday as likely intervention by the central bank helped the currency hold above its record low amid uncertainty about the U.S. elections and possible equity outflows. The rupee was unchanged at 84.1150 as of 09:55 a.m. IST and held just shy of its all-time low of 84.1225 hit on Monday. While non-deliverable forwards (NDF) had signalled the currency may dip to its record low in early trading on Tuesday, the Reserve Bank of India likely intervened via state-run banks to support it, traders said. Persistent outflows from local stocks have maintained pressure on the rupee with foreign investors pulling out about $1 billion from equities in November so far, adding to the $11 billion of outflows in the previous month. Benchmark Indian equity indices, the BSE Sensex (.BSESN) , opens new tab and Nifty 50 (.NSEI) , opens new tab down 0.2% each on the day and have declined about 8% each from their record-highs hit in late September, nearing correction territory. Uncertainty over the result of the impending U.S. elections, which polls suggest is virtually a coin toss, has compounded the pressure. The United States heads to the polls later on Tuesday and early result trends are expected to show up Wednesday morning in Asia. A victory for Republican candidate Donald Trump could lead to a weaker Chinese yuan with "spillover effects on regional currencies," MUFG Bank said in a note. The offshore Chinese yuan was down 0.1% on the day at 7.10 amid mixed price action in Asian currencies. The dollar index was slightly weaker at 103.9, after declining nearly 0.4% on Monday. The Reserve Bank of India is well-equipped to deal with heightened volatility related to the outcome of the U.S. presidential election, two sources familiar with the bank's thinking told Reuters last week. Sign up here. https://www.reuters.com/markets/currencies/rupee-flat-supported-by-likely-cenbank-intervention-ahead-us-elections-2024-11-05/

2024-11-05 02:59

MUMBAI, Nov 5 (Reuters) - The Indian rupee is poised to open at a lifetime low on Tuesday as market participants eye the U.S. presidential election, which polls suggest is virtually a coin toss. The 1-month non-deliverable forward indicates that the rupee will open at 84.14 to the U.S. dollar, inching past the current all-time low of 84.1225 hit on Monday. The local currency has been crawling to new lows over the last three weeks in the wake of foreign equity outflows and nervousness regarding the outcome of the U.S. election. The Reserve Bank of India has intervened on most days the last three weeks to keep the rupee's losses and volatility in check. The central bank is well-equipped to handle to post US election volatility, sources informed Reuters. Thanks to the RBI's interventions, the rupee's 1-month daily realized volatility is less than 1% on an annualised basis. This has dampened the implied volatility, which heading into the U.S. elections is among the lowest in Asia. "I am surprised that the RBI allowed 84.10 to be taken out, having defended for a long time," a currency trader at a bank said. "For me, this indicates the extent of (dollar) buying that is happening." A win for Republican candidate Donald Trump is seen a negative for the rupee and other Asian currencies. A Trump win is expected to push U.S. Treasury yields higher, lift the dollar and weaken the Chinese yuan. Currently, polls and the betting market indicate that Trump and Vice President Kamala Harris are running neck and neck. Trump was favoured in the betting market until a high profile poll on Saturday indicated that he was trailing in a state that we won convincingly in 2016 and 2020. The U.S. will begin voting later in the day and initial trends are likely to begin tricking in on Wednesday morning for Asia. KEY INDICATORS: ** One-month non-deliverable rupee forward at 84.24; onshore one-month forward premium at 9.5 paisa ** Dollar index at 103.90 ** Brent crude futures up 0.1% at $75.2 per barrel ** Ten-year U.S. note yield at 4.3% ** As per NSDL data, foreign investors sold a net $516.5mln worth of Indian shares on Nov. 3 ** NSDL data shows foreign investors sold a net $17.1mln worth of Indian bonds on Nov. 3 Sign up here. https://www.reuters.com/markets/currencies/all-time-low-awaits-rupee-before-us-election-rbi-may-help-out-2024-11-05/

2024-11-05 02:50

WELLINGTON, Nov 5 (Reuters) - New Zealand's central bank painted a bleak economic picture on Tuesday, citing rising unemployment and delayed business investment plans due to financial hardships. The Reserve Bank of New Zealand's (RBNZ) semi-annual Financial Stability Report said weakness in domestic economic activity had become more pronounced and a combination of subdued global growth and high interest rates had reduced demand. "Rising unemployment is starting to create acute financial difficulties for some households," it said. It added that businesses were experiencing lower profitability and weak demand, and lingering cost pressures had made the trade environment more difficult for firms. Over the past two years, the country's economic growth had fluctuated, occasionally dipping into negative territory. The RBNZ expects that the economy contracted in the third quarter, as it raised the cash rate to temper demand and bring down inflation. Unemployment is on the rise and sentiment remains subdued. Since August, the central bank has cut the official cash rate by 75 basis points as inflation eased. RBNZ Governor Adrian Orr told a press conference that the real economy was lagging the interest rate cuts and getting through that lag was a concern. "You don't want surprises or shocks to the downside during that period," Orr said. While the economy was struggling, the central bank said the country's financial system remained resilient and that risks to the system remained contained. The RBNZ said banks are anticipating a slight increase in non-performing loans though still below levels seen in previous recessions. "New Zealand banks are well positioned to continue supporting households and businesses, including effectively handling any potential loan defaults," Deputy Governor Christian Hawkesby said. Sign up here. https://www.reuters.com/markets/new-zealand-central-bank-paints-grim-economic-outlook-2024-11-05/