Global markets rise as US election, fed rate decision, and Chinese stimulus loom

Global markets climbed as the US election, Fed rate decision, and potential Chinese stimulus measures drew closer, spurring cautious optimism.

Global stock markets experienced a rise on Monday, accompanied by a slide in the US dollar as investors brace for a pivotal week marked by the US presidential election, a Federal Reserve rate decision, and expected stimulus measures from China.

Oil prices surged by approximately 2.5%, buoyed by announcements from eight OPEC+ members on Sunday that they would extend supply cuts through the end of next month.

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The decision to delay output increases reflects producers’ concerns about flagging demand from both the US and China.

European and Asian markets posted gains, inspired by a strong performance from Wall Street ahead of the weekend.

In midday trading, London’s FTSE 100 gained 0.6%, Paris’ CAC 40 rose by 0.4%, and Frankfurt’s DAX edged up by 0.1%.

“Traders are gearing up for perhaps the most important week of the year,” said Joshua Mahony, chief market analyst at Scope Markets, noting the high stakes associated with the election outcome and potential policy changes.

The US presidential race remains tight, with Democratic Vice President Kamala Harris and her Republican opponent Donald Trump running neck-and-neck.

The dollar softened against its main counterparts after a recent poll indicated Harris leading in Iowa, a state Trump had previously won.

A Trump victory is anticipated to bolster the dollar and elevate Treasury yields, driven by his pledges to cut taxes and impose substantial tariffs on imports.

Elections for the US Senate and House of Representatives are also drawing attention, with speculation mounting over a potential Republican sweep, which could significantly impact fiscal policy.

“A Republican sweep could lead to substantial fiscal changes, which would likely push yields higher, at least temporarily,” said Peter Esho, founder of Esho Capital.

In addition to the election, investors await a Federal Reserve policy update, with expectations of a 25-basis-point interest rate cut following a substantial 50-point reduction at its previous meeting.

Beijing is closely observing the US election results as China prepares an economic stimulus package aimed at supporting indebted local governments and providing additional funding to banks.

Ting Lu, chief China economist at Nomura, remarked, “The US election results will likely influence the size of Beijing’s stimulus package,” especially as both US candidates have pledged tougher policies on China, including Trump’s proposal for a 60% tariff on Chinese imports.

Asian markets responded positively on Monday, with Hong Kong’s Hang Seng index up 0.3% and Shanghai’s Composite up 1.2%. In the eurozone, Paris and Frankfurt posted midday gains, while London’s FTSE 100 edged up 0.6% amid speculation that the Bank of England will cut rates on Thursday following a dip in UK inflation.

Oil prices were further supported by geopolitical tensions, with Iran’s supreme leader Ayatollah Ali Khamenei warning the US and Israel of a “tooth-breaking response” to recent Israeli strikes.

Market Data (as of 1100 GMT):

London – FTSE 100: +0.6% at 8,229.52 points
Paris – CAC 40: +0.4% at 7,434.89 points
Frankfurt – DAX: +0.1% at 19,271.49 points
Hong Kong – Hang Seng Index: +0.3% at 20,567.52 (close)
Shanghai – Composite: +1.2% at 3,310.21 (close)
New York – Dow: +0.7% at 42,052.19 (close)

Currency and Commodities:

Euro/dollar: UP at $1.0902
Pound/dollar: UP at $1.2964
Dollar/yen: DOWN at 151.82 yen
Brent Crude: UP 2.3% at $74.80 per barrel
West Texas Intermediate: UP 2.5% at $71.20 per barrel

With crucial events converging, markets are likely to experience significant volatility in the coming days as investors await signals on the global economy’s direction.