Pre-Election Calm in Financial Markets
Ahead of the U.S. presidential election, global markets experienced an unusual calm as investors made strategic adjustments. In anticipation of Tuesday’s major economic releases and policy decisions, Asian markets prepared for heightened trading activity. U.S. election news coincided with key economic updates, including inflation data from South Korea, the Philippines, and Thailand, Indonesia’s third-quarter GDP, China’s services PMI, and a significant interest rate decision from the Reserve Bank of Australia (RBA). The Japanese yen also showed increased trading volume as Japan’s markets reopened following Monday’s Cultural Day holiday, while the dollar slipped to 151.50 yen as U.S. bond yields dropped after recent highs.
Global Market Indicators Reflect Pre-Election Jitters
On Monday, markets displayed signs of caution. U.S. stocks were flat, Treasury yields dipped, and bond market volatility eased from last week’s highs, giving a sense of calm before the election-driven activity ahead. Polls released over the weekend showed mixed results that Republicans and Democrats could view as favorable. Most notably, the Des Moines Register/Mediacom Iowa Poll gave Kamala Harris a 3-point lead over Donald Trump in traditionally Republican Iowa, reflecting the tightness of the race. Deutsche Bank’s Jim Reid highlighted that RealClearPolitics data shows the two candidates nearly tied, with Trump at 48.5% and Harris at 48.4%, sustaining a narrow gap since mid-August. This close margin in the popular vote suggests the U.S. election outcome could be one of the closest on record.
Economic Data and RBA Decision Drive Tuesday’s Market Focus
Tuesday’s Asia-Pacific calendar is packed with critical economic data and central bank updates, with the RBA expected to maintain its cash rate at 4.35% amid steady economic growth and persistent core inflation. Analysts expect the RBA to take a conservative approach, projecting a 50 basis point cut by the end of 2025, while central banks in the U.S., Eurozone, Britain, Canada, and New Zealand are anticipated to adopt larger rate cuts. Additionally, South Korea’s inflation is projected to cool to 1.4% in October, the lowest since early 2021, while Indonesia’s GDP is estimated to grow 5% annually, according to a Reuters poll. Meanwhile, China’s Caixin services PMI could reveal modest growth in October, providing a barometer for the country’s economic health. Together, the U.S. election, RBA decision, and critical economic indicators in Asia are expected to set the tone for global markets as the week progresses.
