Stock markets around the world are trading slightly lower today. US index futures are down about 0.2% giving back some of yesterday's 0.5% gains. European markets are up slightly with the FTSE up 0.2% and the Dax up 0.3%.
The US Dollar continues its relentless drive higher against pretty much everything on anticipation of more interest rate increases. Overnight Chicago Fed President Evans, a voter next year, indicates he would not be surprised to see a rate hike in December. The growing prospects of a rate hike this year appear to be limiting the upside for US stocks.
I had a good laugh from Evans' other suggestion that the US election would not have an influence on their decision. Considering the next Fed meeting is less than a week before the vote, and the Fed has been accused of keeping rates low to help the Democrats, it seems to me whatever decision is made could have a political impact.
The election may also still have an impact on the markets in the coming weeks. Although Trump did a lot better in the second debate, he took a hit in the polls from his comments in tapes and videos. The recent widening gap appears to be related more to a fall in support for Trump (or less willingness among the public to openly admit to pollsters that they still plan to vote for him) than renewed enthusiasm for Clinton.
Despite a widening lead in the polls for Hillary Clinton, the stock market reaction to the latest debate was fairly limited. This suggests to me that stocks have priced in peak Hillary and that the political risks for stocks are to the downside. A month is a long time in politics and a lot can change so traders should avoid complacency and be ready for volatility.
Another potential risk to the markets is that the close election race and very different policy stances could impact business decision making and impact results or guidance in the upcoming earnings season. This risk appears even more real today with Alcoa trading lower this morning in premarket action after the company kicked off earnings season with a miss.
The Mexican Peso, on the other hand, continues to recover. MXN surged against USD Monday on a combined boost from the debate and the oil rally but has levelled off today with USDMXN trading just below 19.00.
Crude oil is down slightly today after rallying Monday with WTI still holding above $50. More informal talks among OPEC and non-OPEC countries on the sidelines of an oil conference in Turkey. Yesterday oil popped as Russia indicated support for a deal. It has dropped back today, however, on news from the IEA that OPEC production hit another record in September. Questions over whether Russia would actually participate in a freeze or cut and isn't helping either.
Smartphone stocks may be active today after Samsung announced that it is ending production of the Galaxy Note 7 following more battery fires. This could impact Samsung and its suppliers while potentially benefiting competitors like Apple, Google, Nokia and Blackberry and their suppliers. With Google having recently announced a new phone we could see a big reshuffling of the deck chairs in the sector over the next few months.
Alcoa $0.32 vs street $0.34
Samsung has halted production and sales of the Galaxy Note 7 following more battery fires.
UK same store sales 0.4% vs street (0.3%)
Germany ZEW current 59.5 vs street 55.5
Germany ZEW expectations 6.2 vs street 4.0
Sweden consumer prices 0.9% vs street 1.2%
Upcoming significant economic announcements include:
8:15 am EDT Canada housing starts street 190K
11:00 am EDT FOMC Kashkari speaking
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