European stock markets are anticipated to begin the day on a generally lower note this Tuesday as the U.S. presidential election process unfolds.
In the race, Democrat Kamala Harris and Republican Donald Trump are neck and neck according to opinion polls, with the results expected to remain unclear several days post-voting. Analysts suggest that Trump's potential policies concerning immigration, tax reductions, and tariffs could elevate inflation, bond yields, and strengthen the dollar.
In preparation for anticipated actions by the Federal Reserve and the Bank of England, markets are bracing for a potential 25-basis point interest rate reduction on Thursday. The Federal Reserve's insights regarding the economic outlook and future interest rate direction will be scrutinized closely, especially given the election year complexities and geopolitical tensions.
The U.S. economic agenda is relatively quiet today, with trade deficit figures and service sector activities likely drawing some interest. Meanwhile, European economic updates include final services PMI results from the U.K. and unemployment statistics from Spain, which will be key points on an otherwise light day for European economic news.
Most Asian stock markets performed positively, with Japan's Nikkei surging over 1% as traders returned from a lengthy holiday weekend. China's Shanghai Composite index climbed approximately 2%, and Hong Kong's Hang Seng index increased by 1.3%. This optimism follows Chinese Premier Li Qiang’s assertion of being "fully confident" in reaching the nation's economic goals this year, coupled with the potential for additional stimulus measures.
Expectations are building for a potential announcement regarding the stimulus at this week's Standing Committee meeting of the National People's Congress, China's principal legislative body. Additionally, a private survey today showed that China's service sector activity expanded at its most rapid pace since July, indicating a potential recovery in consumer demand.
In the foreign exchange market, the dollar weakened as 'Trump trades' adjusted amidst the tight presidential race. Gold prices experienced a slight dip due to reduced expectations for rate cuts. Meanwhile, oil prices remained steady in Asian trading after a nearly 3% rally on Monday, following OPEC+'s decision to postpone the reintroduction of barrels to the market.
In the U.S., stock markets moved slightly downwards overnight as investors hesitated to make significant moves before the presidential election outcome and the Federal Reserve's rate decision. The Dow Jones Industrial Average declined by 0.6%, while both the Nasdaq Composite and the S&P 500 saw reductions of approximately 0.3%.
European markets also experienced declines on Monday, particularly in technology stocks. The pan-European STOXX 600 slipped by 0.3%. Germany's DAX index decreased by 0.6%, France's CAC 40 lost 0.5%, and the U.K.'s FTSE 100 ended the day marginally higher.
