The US election will again be the main driver of where the stock market opens this morning. Indeed it’s likely to remain the key to world markets for the next few days.

This is enhanced by the fact that valuations, especially in the US, are still at historically high levels as they head into the election. There remains scope for a significant sell-off if Trump wins.  

Markets are currently attempting to strike the right balance between the greater probability of a Clinton win and the possibility of a significant sell-off on a Trump victory. The more the market falls in advance of the election, the greater the potential for two way volatility and a significant bounce if Clinton does get up. On that basis, we may soon find some temporary support. The September low in the Australia 200 around 5153 may provide a base for trading today.

China’s economic data remains an oasis of stability amongst the increasing volatility created by the US election. Yesterday’s lift in China’s Services PMI was encouraging. It indicates ongoing expansion In China’s tertiary industries which now make up more than 50% of total GDP.

Stability in China’s economy was reflected in yesterday’s news of a sharply lower trade deficit in Australia which is benefitting from stronger commodity prices. Last night’s jump in copper prices reflects the good news on China’s economy and may help lend relative support to mining stocks today.