Global stock market gained ground Monday, while the dollar weakened, as investors braced for a closely contested U.S. presidential election, a Federal Reserve interest rate decision, and anticipated stimulus from China.
Oil prices jumped around 2.5% following announcements by eight OPEC+ members on Sunday that they would extend production cuts until the end of the next month. Concerns over demand in key economies like China and the U.S. had led the group to hold back on output increases. Major European and Asian markets rose in response to a positive lead from Wall Street late last week.
“Traders are preparing for what could be the most significant week of the year,” noted Joshua Mahony, chief market analyst at Scope Markets.
As Vice President Kamala Harris and former President Donald Trump remain in a tight race ahead of Tuesday’s election, investors are watching closely for any signs of a shift that could influence markets.
The dollar softened against other major currencies Monday after a new opinion poll in Iowa, a state Trump won in both 2016 and 2020, showed Harris with a slight edge.
Trump’s potential victory is viewed as favorable for the dollar and could drive up Treasury yields due to his pledges to reduce taxes and impose higher tariffs on imports.
The elections for the U.S. Senate and House of Representatives are also drawing significant attention, with speculation that Republicans may gain control of both chambers.
“A Republican sweep of the Senate, House, and presidency would pave the way for considerable fiscal changes, likely increasing yields and causing temporary volatility for bondholders,” said Peter Esho, founder of Esho Capital.
The election precedes the Federal Reserve’s policy decision later this week, with analysts predicting a 25-basis-point rate cut following a larger 50-point reduction at the previous meeting.
China is also closely monitoring the U.S. election, with officials in Beijing meeting this week to discuss potential economic stimulus measures.
“We anticipate that the U.S. election outcome could influence the scale of China’s stimulus package,” stated Ting Lu, chief China economist at Nomura, in a research note. Both U.S. candidates have pledged to take a tougher stance on China, with Trump proposing a 60% tariff on all Chinese imports.
Economists expect China’s government to approve an additional one trillion yuan ($140 billion) in spending, primarily for local governments, along with another trillion yuan in funding for banks. The Hong Kong and Shanghai markets posted gains, with Shanghai closing up over 1%. Tokyo markets were closed for a holiday.
In the Eurozone, Paris and Frankfurt were higher by midday, while London advanced 0.6% ahead of an expected rate cut by the Bank of England on Thursday following below-target inflation.
Oil prices found additional support after Iran’s Supreme Leader Ayatollah Ali Khamenei issued a warning over the weekend that Israel and the U.S. would face a “tooth-breaking response” following an Israeli strike on October 26, which itself was a reaction to an earlier missile attack.
Key Figures as of 1100 GMT
- London – FTSE 100: UP 0.6% at 8,229.52
- Paris – CAC 40: UP 0.4% at 7,434.89
- Frankfurt – DAX: UP 0.1% at 19,271.49
- Hong Kong – Hang Seng: UP 0.3% at 20,567.52
- Shanghai – Composite: UP 1.2% at 3,310.21
- Tokyo – Nikkei 225: Closed for a holiday
Currency and Commodity Movements
- Euro/dollar: UP at $1.0902 from $1.0833
- Pound/dollar: UP at $1.2964 from $1.2917
- Dollar/yen: DOWN at 151.82 from 153.01 yen
- Euro/pound: UP at 84.15 pence from 83.86 pence
- Brent Crude: UP 2.3% at $74.80 per barrel
- West Texas Intermediate: UP 2.5% at $71.20 per barrel
