European equity markets have started the day with a mild upward movement, continuing the trend from the previous session’s strength, while US futures indicate a stabilizing phase following substantial gains. The US dollar is retreating from its recent highs post-presidential elections, impacting the foreign exchange market as the Australian and New Zealand dollars regain strength. The US Treasury market is seeing slight firmness as investors await indications from the Federal Open Market Committee (FOMC) meeting scheduled for today, while German Bunds are lagging, exacerbated by uncertainties following the collapse of the German coalition government. In commodities, crude oil is slightly down, reversing a portion of its recent gains, while gold prices increase due to the dollar’s weakness, and base metals show positive momentum driven by China’s market performance.
As the session evolved, European indices, including the Stoxx 600, exhibited a steady upward trend. Despite a lack of significant economic data from the Eurozone today, market participants remain attentive to forthcoming policy announcements from the Bank of England (BoE) and the Federal Reserve (Fed). The positive outlook across various sectors in Europe is largely driven by robust performance within basic resources, attributed to rising metal prices following encouraging economic figures from China. Conversely, the telecommunications sector has underperformed, with drops in stocks like Telefonica and BT, leading to broader sectoral pressure.
In the US markets, futures are up marginally, taking a pause after an exuberant session where the S&P 500 reached all-time highs following the election of Donald Trump. Investor sentiment is now focused on the FOMC, with expectations of a 25 basis points rate cut likely due to prevailing economic conditions. The dollar index’s pullback is notable, as the market recalibrates after Trump’s victory, pushing the euro and British pound to regain some lost ground. Awaiting precise moves from the Fed and BoE, the market sentiment remains cautiously optimistic, though vigilant of ongoing geopolitical developments that could influence economic trajectories.
Treasuries in the US have displayed modest firmness as traders position themselves ahead of the anticipated monetary policy announcement from the Fed, where a 25 basis point cut is largely factored into market prices. The bond market’s movement contrasts with German bunds experiencing downward pressure due to political instability in Germany, particularly following the sacking of Finance Minister Lindner, which jeopardizes the coalition government’s stability and threatens potential snap elections in early 2024. Meanwhile, British gilts are trading up as markets prepare for the BoE’s decisions, while ongoing sell-offs in German bonds reflect investor concerns over an unstable political landscape.
The commodities market shows crude oil prices softening after previous gains, with uncertainty surrounding geopolitical tensions in the Middle East contributing to fluctuating commodity prices. Gold prices are supported by the dollar’s decline, leading to increased buying interest, although prices remain under pressure due to previous highs. Additionally, base metals are experiencing gains stemming from optimistic outlooks driven by bullish comments from industry leaders regarding China’s economic rebalancing and stimulus potential, alongside robust export figures coming out of China that imply potential resilience in demand despite global tariff threats.
In the Asia-Pacific region, stock markets exhibited mixed results amid the broader global adjustments post-election. Australian shares exhibited slight upward movement supported by strength across various sectors, despite negative trade data. Japan’s market initially climbed but struggled to maintain momentum, reflecting a cautious investor stance. Chinese markets remained resilient, buoyed by improved trade figures and expectations of fiscal stimulus, illustrating the broader narrative of market participants absorbing the implications of the US election outcomes while keeping a close watch on domestic policy shifts, particularly from the People’s Bank of China, which emphasized its commitment to an accommodative monetary policy to stimulate growth amid ongoing challenges.