We've had big swings in world markets overnight but this morning once again finds stocks trading mixed with the Dax down 1.0% and the FTSE down 0.3%. US index futures are up 0.1% but are down from overnight highs. Asia Pacific markets finished in the green with the Hang Seng up 1.0% and the Nikkei up 0.8%.
The initial reaction to last night's debate was a feeling that Hillary Clinton won which sent stocks higher initially. The euphoria quickly faded suggesting it was a bear market bounce.
Traders appear to have recognized that even though she scored a number of points, there weren't any big surprises either. She didn't appear to score a knockout blow, and he didn't completely implode so this race is likely to go right down to the wire.
Trump did make a number of points relevant to market players, accusing the Fed and chair Yellen of keeping interest rates artificially low to help the Democrats and of creating a bubble in the stock market. He also suggested the stock market could be in trouble if interest rates go up.
Trump also was antagonistic toward trade deals, particularly NAFTA and Mexico. MXN staged a huge 2% pop after the debate but as with sticks, the initial bounce has faded back to a still pretty good 1.2% gain. Interesting CAD the currency of America's largest trading partner, was unaffected by the debate trading flat overnight.
The big question for traders in the coming days is if Ms. Clinton has been able to stop the momentum Mr. Trump has gained over the summer. Also the lessons from this year's Brexit vote and last year's UK election showed that polls aren't always accurate.
Historically, as a general rule of thumb, conservatives in different countries have tended to poll 2-3% lower than their actual support. Given the negative attacks against him and his supporters, this difference could be even bigger for Trump. The quick end to the Clinton bounce suggests that some traders are not as complacent about a Clinton victory at the polls as they were before the debates. A close contest could lead to higher market volatility and increased trading opportunities over the next six weeks.
There's a lot of other news moving the markets this morning too. German stocks are under pressure again with Deutche Bank and Volkswagen in the crosshairs over their exposure to big fines in the US with the prospects of German government support negligible.
Italian stocks are also sliding with the FTSEMIB down 1.0%. PM Renzi finally set a date for an upcoming referendum for December 4 apparently to give him more time to sell his side. Expectations had been for this vote to be in October. If the first move of a campaign is to stall and delay, one has to think PM Renzi's side may be in trouble already, particularly since it’s been widely speculated he may have to resign if he loses to the euroskeptics.
Crude oil continues its seesaw action of one day up and one day down. WTI and Brent are down 1.5% giving up much on Monday's gains after Iran indicated it's at the Algeria conference to talk not to make a deal and that it's not prepared to freeze production.
There have been no major corporate announcements this morning.
China industrial profits 19.5% vs previous 11.0%
Sweden producer prices (0.3%) vs previous (1.1%)
Sweden trade balance SEK (10.3B) vs previous SEK 0.5B
Sweden retail sales 2.8% vs street 3.7% vs previous 1.1%
Italy industrial orders (11.8%) vs previous (4.2%)
UK CBI retailer sales (8) vs street 5 vs previous 9
Upcoming significant economic announcements include:
9:45 am EDT US Markit flash service PMI street 51.2
10:00 am EDT US consumer confidence   street 99.0
10:00 am EDT US Richmond Fed (2) vs previous (11)
11:15 am EDT FOMC Fischer speaking
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