A reversal of the trends we saw last week took place on Monday, with Asian markets caught in the euphoria as well.
The S&P 500 index, an important lead for Asian markets, closed up 2.22% on Monday, erasing the 1.94% slide last week in one session. With a Clinton win likely to have been partially priced in prior to last week’s news on the FBI investigations, the rally to 2130 levels as of Monday’s close reflect the market’s view that Democratic candidate Hillary Clinton could have regained her safe lead. Strong gains were led by the financials and industrials sectors. While it will be of no surprise factor, a Clinton win could still bring about some upsides for the S&P 500 index towards the recent all-time highs while a result in the Republicans’ favour could mean dips to June’s lows. Nevertheless the probability of the latter has once again been reduced with RealClearPolitics reflecting Mrs Clinton pulling ahead.
Expect mixed pressure for Asian markets today with the strong overnight leads and the sheer proximity to the US elections. The decided bullish North American markets on Monday will be a strong boost for Asian markets today. This upside could however be capped with the slight lift in Asian indices yesterday ahead of the US open and the event risks from the US elections fast approaching. We will not be too surprised if prices enter consolidation mode in the day, choosing to wait out of the storm.
Some attention should still be diverted to China’s October trade data due any time in the day. Specifically, this will be the impact on regional markets including the HSI, TAIEX and KOSPI should we get a result that strongly deviates from the market consensus. September’s exports figure had been the worst print in 7 months and the market will be keen to watch if October’s performance would match the improvement in PMI data.
Meanwhile Oil - US Crude prices drifted into a sideway trade on Tuesday morning with the US Presidential elections and API crude oil report looming ahead. Comments from OPEC Chief stating that Russia is “on board” with an OPEC agreement to limit crude oil production provided some support for prices. However this was not enough to instil confidence in the market for a reversal. The concern with regards to the earthquake that struck Cushing, Oklahoma also subsided with little damages to the pipeline reported and normal service resumed. Focus will be on the API report overnight which had pre-empted the EIA report lately.
Yesterday: S&P 500 +2.22%; DJIA +2.08%; DAX +1.93%; FTSE +1.70%