US election debate does little to sway stock market investors

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US stock index futures and Asian shares trade within tight ranges, as investors say they remain cautious ahead of polls.

Global stocks barely budged on Friday as investors remained wary with less than two weeks to go before the United States presidential election and awaited a breakthrough in fiscal stimulus talks in Washington, DC.

The final debate between President Donald Trump and his Democratic challenger Joe Biden on Thursday night presented few surprises for election watchers but slightly reinforced investor caution heading into the November 3 polls.

US S&P 500 stock index futures had dipped slightly after the debate but were mostly flat by midday trade in Asia. The underlying index had gained about 0.5 percent in the previous day on hopes that the US Congress and the White House could soon strike a deal on another round of COVID-19 stimulus funding to support companies and jobs.

Shares in Asia hardly budged, with MSCI’s broadest index of Asia-Pacific shares outside Japan flat while Japan’s Nikkei ticked up 0.2 percent.

The CSI 300 index of mainland Chinese stocks also edged up 0.2 percent.

Coronavirus and corruption

At Thursday’s debate, Biden renewed his criticism of Trump’s handling of the coronavirus pandemic as Trump levelled unfounded corruption accusations at Biden and his family.

“I don’t think there’s anything new in it, I think that’s why the market is not moving much. The focus is still on the timing of the fiscal stimulus and how big it is,” said Moh Siong Sim, foreign exchange analyst at Bank of Singapore.

On Thursday, US House of Representatives Speaker Nancy Pelosi reported progress in talks with the Trump administration for another round of financial aid, saying the legislation could be hammered out “pretty soon”.

While the news helped to lift US share prices, the US S&P 500 is still down 0.9 percent so far this week amid uncertainties over stimulus and the election.

US S&P 500 futures after presidential debates chart [Bloomberg]

A widening lead in opinion polls by Biden is prompting many investors to bet on a Biden presidency and also a “blue sweep”, where Democrats win both chambers of Congress.

“A blue wave may lead to concerns about the impact on the tech sector, while a Biden win and a split Congress may imply another four years of limited policy changes and politicking,” said Mary Nicola, senior economist at Pinebridge Investments in Singapore.

Reflecting concerns that Democrats could take a harder stance on big tech firms, the Nasdaq index, which had led the market’s rally, has underperformed lately, having lost 1.4 percent so far this week.

Expectations of bigger government stimulus have also boosted US borrowing costs.

The yield on the 10-year US Treasury note rose to a four-and-a-half-month high of 0.87 percent on Thursday and last stood at 0.853 percent.

US jobs hope

US economic data published on Thursday were stronger than expected, as jobless claims fell by more than analyst forecasts and existing home sales rose to a more than 14-year high.

In the currency market, the US dollar bounced back from Wednesday’s seven-week low but stayed under pressure as investors began to wager on a Biden presidency and big US stimulus package.

The euro traded at $1.1803, down 0.2 percent and off Wednesday’s high of $1.1805 but still up 0.7 percent on the week.

The yen changed hands at 104.77 yen per dollar, stepping back a tad after its biggest gain in nearly two months on Wednesday.

The Chinese yuan stood at 6.6729 per US dollar in offshore trade, off the 27-month high of 6.6278 it touched on Wednesday.

Oil prices were supported by hopes of US stimulus and the prospect of extended output cuts by the world’s top exporters.

Brent crude futures ticked up 0.3 percent to $42.59 per barrel while US crude futures rose 0.25 percent to $40.74 per barrel.