Summary: With the deadline for a stimulus deal ticking, Republicans are still opposed to a large package making it increasingly unlikely a deal will be reached before the election. Even if Pelosi and Mnuchin can reach an agreement, Republicans in the senate have limited appetite to approve a larger package.
Risk assets struggled overnight as the ongoing fiscal impasse weighed with the US election drawing close. This softer tone has carried through into the Asia trade with the added concerns surrounding election interference weighing.
E-minis and Asian indices are trading lower, alongside gold and silver whilst the USD has caught a mild risk-off bid, outperforming G10FX. Up next tonight, is weekly jobless claims and the final trump-Biden debate, which this time comes with a mute button!
As the US election draws closer, the warning that Russia and Iran have attempted to interfere with the US election serves as a reminder that there is still a range of scenarios that could play out come November 3.
Another potential complication in the offing is the rising COVID-19 case count, which continues to trend higher. According to Bloomberg, New Jersey recorded its highest case count since July, along with 10 other states, including Wisconsin, Iowa, Nebraska and Ohio. Hospitalisations and ICU cases have also risen, although the silver lining, deaths are yet to follow suit.
Meanwhile risk assets are on edge hanging out for news on the stimulus bill, remaining vulnerable to headline risk with the US election in close quarters. With markets this morning seeing no meaningful progress on fiscal 4 and reacting to the heightened political instability that comes with the confirmation of efforts to manipulate the presidential race. Specifically, the extent to which the confirmation of foreign interference tactics potentially plays into the probabilities of a contested election.
The ability for either candidate to seize upon accusations of foreign interference is heightened and raises the probability of a contested outcome and protracted period of uncertainty following, particularly as the race could be closer than polls currently indicate. A reminder that it is perhaps premature to become complacent on a clean sweep and price out the fears of a contested election at this stage. And confirmation once again of a choppy trading environment until such a precipitous event risk has passed.
A contested outcome in the worst-case scenario, setting the stage for civil unrest across a nation already divided as factions of the population on either side believe the victory has been stolen. Particularly as voter intimidation or interference efforts undermine confidence in the election outcome.
Foreign interference in the US election is not a new concept, but it is one that adds to the already diminishing trust in institutions, increasing stress on economic and political systems, as the fairness and reliability of the election is called into question.
In crises, the strengths and weaknesses of our existing operating models are laid bare. And the news will only add to the increasingly polarised environment in the US that has been worsened by the pandemic, with more than 210,000 deaths from the coronavirus, large scale unemployment and ever-increasing income and wealth disparities. COVID-19 started as a health crisis but has quickly morphed into an economic and social one.
The market is trying to get back to the pre-Covid and pre-war times, but that model is broken. A new dawn is here and the financial world needs to adapt.
Steen Jakobsen,
Chief Investment Officer
A political switch in China towards less tough control of its people and companies may kick things back into gear.
Redmond Wong,
Market Strategist
While the economic situation in Europe may not be as bad as feared, there's still a plethora of things to fix.
Chris Dembik,
Head of Macroeconomic Research
As the world turns increasingly bipolar, equity markets face harsh times as they transition into the new reality.
Peter Garnry,
Head of Equity Strategy
New alliances and collaborations outside of China may lead to prosperous times in Asia.
Charu Chanana,
Market Strategist
For years, it was thought that the balanced portfolio was a thing of the past. But recent developments may have changed that.
Peter Siks,
Investment Coach
Following a dramatic and volatile 2022 with good returns, a lot of this year's commodity performance may be driven by Chinese politics.
Ole S. Hansen,
Head of Commodity Strategy
2023 could be a tough year for currencies but EUR and JPY may have some upside.
John J. Hardy,
Head of FX Strategy
The commodity-heavy Australian market may have a good start to 2023, as the Chinese focus on growth signals demand for Aussie resources.
Jessica Amir,
Market Strategist
From a near-perfect environment for speculative assets before 2022 to the opposite, crypto faces fundamental challenges.
Mads Eberhardt,
Cryptocurrency Analyst
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)
