Equities up big pre -NY open
Cable wobbles on lockdown news
Nikkei 1.39% Dax 1.92%
UST 10Y 0.86
Asia and the EU
UK PMI Manufacturing 53.7 vs. 53.3
North America Open
USD ISM Manufacturing
A very strong surge in Asia and Europe send stock index futures higher by 150 basis points ahead of the US Open, but risk-on flows did not touch the currency markets with most of the major pairs flat on the day.
It’s difficult to pinpoint the reason for the enthusiasm given the fact that polling ahead of the election is showing a tightening Presidential race that may very well be contested while the prospects of a Blue Wave have faded. That means at best the US will have a divided government with the Republican Senate likely sabotaging any attempts by Biden to pass massive stimulus programs.
The move in equities could just be pre-positioning in thin markets with dealers trying to “dress up” the tape and establish shorts at higher levels ahead of what is likely to be a very volatile session on Election night.
Meanwhile, in FX most of the pairs were subdued with the exception of cable which traded lower by about 30 pips on the back of the news that the UK will go into lockdown to curb the COVID outbreak which has now reached 1M cases
Into North America, the market wil get a look at US PMI Manufacturing data but all eco data will have minimal impact on trade as all eyes will be on the election. The candidates remain locked in a battle over Pennsylvania which is quickly becoming a must-win for both, although a loss for Trump will almost certainly be fatal if he loses the state. Given the high stakes, both candidates are prepared to litigate the election so the uncertainly surrounding the outcome is likely to generate high volatility over the next 24 hours and today’s rebound could quickly give way to a selloff if there is little visibility on who the next President will be.