Markets are likely to be more positive in Asia today than many would have expected now that FBI director Comey has written to Congress and said the FBI’s conclusions on Hillary Clinton’s email use are “unchanged since July”.
Coming so close to polling day, and given it was Comey’s original intervention which helped Donald Trump’s campaign surge into contention, this new news is likely to unwind some fear of a Trump victory.
Forex traders are the first to react and the US dollar is stronger with the yen and euro 0.84% and 0.72% weaker respectively as USDJPY rallies and EURUSD sells off. The more positive tone has also helped the Australian dollar which has rallied to 0.7690.
Gold is still at $1303 but likely to fall if the positivity takes hold in Asia today.
Here’s the scoreboard (7.49am):
- Dow: 17888 -42 (-0.24%)
- S&P 500: 2085 -3 (-0.17%)
- SPI 200 Futures (December): 5,124 -29 (-0.6%)
- AUDUSD: 0.7698
The top stories
1. The markets haven’t really priced a Trump victory – brace for volatility. When I survey prices across markets it doesn’t look like traders have anywhere near priced a Trump victory in Tuesday’s presidential election. Sure stocks in the US fell for 9 days, but they are only off 3%. Bonds have hardly rallied and the USDMXN is only at 19 – it was at 19.90 around the time of the first debate. That means we need to brace for volatility, writes Elena Holodny, who has surveyed a host of analyst notes for the article.
But you’ll also see some hope in this piece because Elena highlights that markets bounce back pretty quickly in normal circumstances.
2. ‘HOW DID WE GET HERE?’ And if you are wondering what the heck is going on, the NAB economics team released a really great look at how economics has impacted this election in the US on Friday. In particular they highlighted just how income distribution and wealth are colouring the voting patterns driving the rise of Donald Trump.
Normally these moves would favour the Democrats but the disaffection that goes with them is driving Trump. I’ve got more here.
This also goes to the heart of everything that is happening in global politics – Lord Turner says “we may be at a turning point in the nature of capitalism”. Chris Pash covered the new formula for the secret to happiness back in October. What was important about that formula was that it added a comparison term to the equation to take account of the fact that what happens to us but also how this compares to other people is a key ingredient in our happiness.
Now think about an economy where technology allows Facebook to be worth $370 billion in market capitalisation but only employ 14,000 people. That according to Lord Turner – chairman of George Soros’ economic think thank the Institute for New Economic Thinking – is undermining capitalism’s legitimacy with the people.
“This information and communication technology enables huge wealth creation with very little investment for some categories of people in the economy and creates jobs that are very low pay for others,” he said.
You really should read that article – it explains a lot. Throw in the fact that comparisons are important for our happiness and the rich getting richer while workers feel left behind neatly explains the global political malaise right now.
4. Australian stocks remain under pressure but we could be close to a bottom – maybe. While the ASX 200 hasn’t fallen for 9 days in a row, it has lost 5.8% since the 5498 high almost a month ago. It closed at 5180 on Friday and the futures market had prices down another 29 points on Saturday morning.
But 5180 is the last line of Fibonacci support and with news that Clinton has no case to answer on the email scandal, we might just have an up day today.
5. US jobs were strong enough to put a lock on a December Fed hike – assuming markets don’t go into a funk post election. US jobs missed with a 161,000 print Friday but the upgrade to September’s figure from 156,000 to 191,000 more than balanced that out. Throw in wages growth that is now running at the fastest pace since the recession and you have the preconditions for a Fed hike.
That’s something Fed vice-chair Stanley Fischer intimated Friday when he said the Fed was at risk of overshooting its goals.
Interestingly, on this topic, Barrons’ Gene Epstein has a great article in this week’s edition showing how 4.3 million Americans who left the workforce and who the Fed thought would come back remain absent. This means the labour market is tightening faster than the Fed had expected. It helps explain why wages are rising and it also means smaller non-farm payrolls can still be compatible with a Fed hike.
6. The election is everything this week but there is still plenty of other data and events. It’s hard to look away from the flame of the election this week but in Australia we still have very important releases in the NAB business survey and Westpac consumer sentiment. Both releases are vital in giving an indication of where the economy is headed as Christmas looms large on the horizon.
With thanks to the NAB’s economics team, I’ve got these data and all the key events for the week ahead in my Australian Diary here.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
After outperforming the other majors in anticipation of its “shrink to greatness” strategy, ANZ has encountered profit taking in the past couple of weeks. There’s an argument to say that, without its Asian business, ANZ warrants a valuation that’s broadly similar to the other major banks.
However, it’s hard to see where its major competitive advantage lies in the domestic market or why it’s compellingly attractive absent a bit of a valuation discount to its peers.
Last week’s profit report saw the share price break below the support of a double top pattern. It will go ex its 80c dividend next week and that could mean the next chart test will be support in the $25.60/$25.90 zone.
You can follow Ric on Twitter @ricspooner_CMC
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