Overnight market action displayed a clear risk-off tilt after President Trump called off interparty negotiation of a new fiscal stimulus bill. The President promised a new package after the November 3 election. Shares and base metals sank as the reflation trade soured. Bonds rallied, although gold edged lower as the US dollar reversed recent weakness.
Consumer stocks were hit hardest, falling around 2% on average. High flying IT stocks also tumbled, dragging on the Nasdaq indices. Utilities were the only S&P 500 sector to finish in the green, lifted by the late rally in the bond markets as investors speculated the US Federal Reserve will need to cover the stimulus gap in the short term.
Energy markets once again went their own way. A strengthening hurricane in the Gulf of Mexico raised supply fears. However the buying may have been precautionary ahead of tonight’s inventory data, with memories of recent surprise draws fresh in traders’ minds.
Asia Pacific markets are looking at negative starts to share trading and lower volumes while mainland China markets remain on holiday. Australia may prove an exception, after the Federal government delivered a stimulatory budget overnight. Income tax cuts and business concessions could drive overall support for shares. However large banks and mining companies largely missed out on the targeted growth measures, and underperformance by these groups may limit any gains.