Equities on hold after the debate

US presidential debate fails to stir up markets

Wall Street has a quiet session overnight, with stocks drifting higher on lingering stimulus hopes. The S&P 500 rose 0.59%, the Nasdaq rose 0.28%, and the Dow Jones climbed 0.53%. Across Asia stock markets are almost unchanged as the presidential debate, which failed to produce any dramatic news, could be considered a draw. The Nikkei 225, Shanghai Composite and CSI 300 are all unchanged. The Kospi has eased 0.25%, Hong Kong, Singapore, Jakarta and Kuala Lumpur are flat and Australia’s ASX 200 and All Ordinaries have eased 0.30%.

Financial markets bounced around in noisy range trading overnight, mostly as the street finally prices in the reality that the US Senate may not pass a stimulus agreement agreed between Nancy Pelosi and Donald Trump. On the stimulus front, progress continues to be made, apparently. Still, I suspect that President Trump’s influence over Senate Republicans has significantly weakened, moving inversely to his slump in national polls. Many Republican senators are running for re-election on November the 3rd, and they are keenly aware that voting for a massive spending package could torpedo their dreams of returning to Congress.

As there was no shock from the US presidential debate, Asian equities markets are likely to remain quiet on Friday. The US stimulus negotiations are the only game in town, and Asia will be content to follow the lead of US markets in this respect.

The markets have already priced in a Biden victory in the US election. The real race is the Senate one, which is still too close to call. Its importance is increasing, as financial markets have positioned themselves for a “blue wave” (Democrat) clean sweep. However, if the Republicans manage to keep control of the Senate, it would likely be as a temporary negative for markets, as it would leave Democrat tax hikes almost certainly dead in the water.

European markets are likely to remain under pressure, as Covid-19 cases continue spiking, with the likelihood of further restrictions hampering domestic consumption.

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