Markets reversed recent support for growth and risk in overnight trading. Important data from China today and the US Presidential debate tonight present short-term event risks. Shares fell in both Europe and the US as investors battened down the hatches. Oil markets were hit hard as OPEC+ discipline fears amplified the general risk-off tone. Both bond and gold markets remain bid, offering further evidence of the decline in sentiment.
Official PMI data for China due later this morning is forecast to show expansion in both manufacturing and non-manufacturing activity in September. The release is quickly followed by the Caixin manufacturing PMI, also expected to indicate an ongoing pick up. While politics muddies the water somewhat, a positive outcome for this key engine of global growth could re-assure nervous investors.
The US Presidential debate may also swing sentiment, despite recent reports that the US Federal Reserve’s actions to support the economy into 2021 could overwhelm any policy considerations. The balance of power in the House of Representatives and the Senate remain the most crucial factors, but the President’s veto powers mean the race for the White House influences market thinking. It’s unclear whether the recent corrective moves in US shares are related to the commanding lead of the Democrat nominee, a party seen as less business friendly than the Republicans. Any gains for the incumbent in tonight’s debate could lift sentiment.
Data released yesterday indicates Russian oil production in September is running around 1 million barrels per day ahead of its OPEC+ quota. Crude prices fell almost 4%, despite calls from both Saudi Arabia and Russia for discipline and unity.
Asia Pacific trading today is likely to see lower volumes and general caution. Futures markets indicates opening falls for shares, and continuing US dollar weakness could exacerbate growth fears as regional currencies rise.