Markets retrace, RBA to cut

Markets retrace, RBA to cut

Overnight action saw many markets rebound as traders and investors took risk off the table. Major currencies found support, gold moved higher and oil and copper rebounded from recent weakness. The US election continues to weigh on market sentiment, as consensus moves towards a market rattling close and disputed result.

The Australian dollar moved slightly higher, after recent selling in anticipation of an interest rate cut today. The Reserve Bank of Australia has flagged a reduction in cash rates from 0.25% to 0.10% and the introduction of a quantitative easing program. The recent fall in the Aussie toward 70 US cents could mean the central bank support is already priced by forex traders. In contrast, Australian shares are considerably weaker, and may react positively to any confirmation at this afternoon’s decision.

International stocks diverged. European stocks bounced, and in the US high flying tech stocks came under pressure while blue chips found support. Futures markets point to gains for regional markets after a weaker trading yesterday.

US election results will start to emerge during the Asia Pacific trading session tomorrow. The presidential election could come down eleven or twelve “swing” states where both candidates have focussed recent campaigning. Polls close in these states from around mid-session, meaning investors may take the opportunity to trim risk today ahead of potential volatility tomorrow.