US election ahead, with Trump appearing to be in the driving seat

Its election day, and markets appear to be taking the uncertainty in their stride. European equities are on the rise, with the FTSE 100 on course for its third consecutive day of gains. One area of strength has come from the UK-listed miners, with the recent rebound in the Chinese manufacturing PMI providing the basis for optimism around a potential resurgence in response to recent stimulus measures. With the Chinese National People’s Congress’ Standing Committee meeting this week, there is an expectation that we will see yet another major stimulus announcement in the near-future. Gains for Copper and Iron ore prices highlight the expectation that we will see greater demand for major infrastructure projects irrespective of who takes the White House, while the Chinese recovery provides a positive backdrop for the commodity bulls to hang their hat on.

Today sees the US electorate head to the polls, in a hotly contested election that has huge implications for global markets over the coming years. Despite a brief spike in support for Harris off the back of the weekend polls, we have seen the betting markets push back in the direction of a Trump victory since. While many have put the rise of US yields and the dollar down to the so-called ‘Trump Trade’, the weakness seen since Friday’s weak payrolls figure highlights the fact that much of it came as a result of the strong jobs report a month ago. The conjecture over what will perform best in each circumstance ultimately comes back to the idea that markets will be happy to see a split congress which limits the ability to push through any of the more extreme policies.

An overnight rate pause from the RBA has helped push the Australian dollar sharply higher across the board. In an environment where most of the central banks are firmly in easing mode, the data dependent approach from the RBA looks to solidify a prolonged period of inaction as inflation remains well above their target across both headline and core (trimmed mean) metrics. Despite the RBA forecasts pointing towards higher unemployment and lower GDP, the strength of the AUD highlights the perception that we could yet wait a while until the RBA finally starts to take that first step towards lower rates.