by Eli Wright
The upcoming U.S. election and important economic reports will drive this week's FX, commodity, and stock markets. Here’s what to watch in the week ahead:
US Presidential Election
At the close of US markets last week, news broke that the FBI had discovered new emails that might be relevant to its completed investigation of Hillary Clinton’s use of a private email server. Friday's thinly traded markets fell on the news with the S&P 500 falling .31% and volatility jumped by 2.29% to reach a two week high.
Since markets have largely already priced in a Hillary Clinton win, any signs she's losing ground to Donald Trump could significantly increase volatility in the currency markets as well since Wall Street hates the uncertainty that a Trump presidency represents. Indeed, on Friday, the US Dollar Index, which earlier in the day had risen as high as 98.92, fell 0.62% to 98.31. If Trump's chances of victory should rise in the polls over the course of the week, it could potentially boost the Russian ruble, while further depressing the Mexican peso which dropped by 1.1% after the news broke.
This morning, Asian and Pacific markets began the week with increased volatility and mirroring US markets on Friday closed lower. The Nikkei 225, Hang Seng, and Shanghai Composite each closed down around 0.1 percent. European markets saw a shaky openi, with the Stoxx Europe 600 starting the day down 0.4 percent. The FTSE 100, CAC 40, and DAX were all down 0.1 percent in early trading.
Economic Calendar
Though the election seems to be dominating the news as the week begins, a number of key economic announcements in both the US and UK will likely drive the markets as the week progresses: both the Fed and the Bank of England have interest rate announcements coming up. In addition we'll get a look at important economic metrics for the US including:
- On Tuesday, ISM Manufacturing PMI, forecast at 50.3 (slightly higher than the previous 49.4)
- On Thursday, ISM Non-Manufacturing PMI, forecast at 53.0 (compared to the previous 51.4)
- On Friday, November 4, the always anticipated Nonfarm Payrolls report, forecast at +175K
Any unexpected negative surprises from these reports could potentially reduce the chances of a rate hike in December, and might send the dollar plummeting.
Commodities
The OPEC fueled will-they/won't they freeze production saga continues as major oil producers, including Iraq Iran and Russia, insist that they should be exempt from any deal, insuring that no production freeze agreement will emerge any time soon. Oil and gas prices are reacting accordingly. Crude oil and Brent are down as of this writing. We believe oil prices will continue to hover around the $50/barrel mark for the near future, or drop slightly.
Gold is up to $1,275, having risen to an almost 4-week high on Friday. As a safe-haven asset, any increased chances of a Trump victory could move the precious metal higher.
Equities
As mentioned above,stocks took a hit on Friday. The Dow, NASDAQ , and S&P 500 were all down, 0.05%, 0.50%, and 0.31% percent, respectively.
Earnings season continues, with reports this week from Loews (NYSE:L), Pfizer (NYSE:PFE), Edison International (NYSE:EIX), Noble Energy (NYSE:NBL), Enbridge, Allstate, Facebook (NASDAQ:FB), MetLife (NYSE:MET), Shaw Communications (NYSE:SJR), Time Warner (NYSE:TWX), CBS Corporation (NYSE:CBS), TELUS Corporation (NYSE:TU) , Qualcomm (NASDAQ:QCOM), and Starbucks (NASDAQ:SBUX), among others.