Overnight Market Wrap: 4 November

Overnight Market Wrap: 4 November

Key Points:

RBA cuts rates to 0.1% and increases QE as expected

US stocks rally over 2% on the day

USD weaker across the board with AUD best performer

Here we are with one of the biggest events of the year and risk is firmly on. Are markets focussing on a Biden Blue Wave, will Trump rally late? Lots of questions with answers to be revealed over the next few hours. The bigger question really is who will take the Senate as that could be more important for future policy than the main seat. The first results are likely to start coming in this morning between 1100 and 1200AEST with results for Kentucky and Indiana to show an easy win for Trump, however Florida will be the main event from those first states. A usually strong Republican state could be a key factor in which way the election will go, with speculation in the polls recently that Biden could claim victory. Volatility is likely to be high as markets react on any projections and counts on the swing states. With a high level of mail in votes it’s likely that there could be long delays to any announcements unlike in previous elections. Pennsylvania may not be able to declare the result until the end of the week. For markets overnight we’ve seen a strong rally in stocks, Oil and weakness in the USD with commodity currencies the biggest gainers which would indicate the markets believe we will see a clear winner today. Personally, I think it’s unlikely, but time will tell. It’s highly possible that Trump will contest a decision against him and we will see a drawn out conclusion which may end up in the Supreme Court. Nasdaq, S&P500 and the Dow Jones all finished up over 2% on the day and Gold rallied back to 1910. The AUD the star performer against the USD after the RBA cut rates back to 0.1% and indicated that negative rates are unlikely we saw the currency rally over 2% in line with S&P500, it’s closely related driver. Likewise all other currencies were stronger against the USD but we are likely to see some large swings today as the results come through. Before the election news we will get a look at NZ jobs data along with Australian retail sales but unlikely to be key drivers today with external influences the bigger movers on the day. In other news the Shanghai Stock Exchange has suspended the planned Ali Baba’s ANT Group IPO stating ‘material information has been withheld’ causing the stock to slip up to 6% at one point. Unsurprisingly the IPO was more than 1000 times oversubscribed. European and US PMI’s will be released later against the back drop of the election news alongside the ADP report ahead of Friday’s NFP release.

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