Despite the move higher in the US overnight we can still see a level of nervousness around the US election. It is still too close to call as we wait for Michigan, Pennsylvania, North Carolina, and Georgia. Biden still looks more likely for the Win, but it is anyone’s election. Trump has threatened that he will contest the election results, but at the end of the day, it is in the constitution that he must leave the office late in January if he loses.
Throughout our session today it is likely we will see a winner announced, but in saying that it is so close that we could be waiting a little longer.
Traders moved back away from the US dollar and we saw many move back into credit markets for safety. This is a signal that investors are still nervous overall.
Local Bank reporting has been mixed so far. BEN last week was a better-looking report than ANZ and WBC. WBC missed expectations. We have NAB today and MQG tomorrow Nov. CBA will give a trading update the next week.
Australian imports into China are still in the spotlight with an unofficial boycott from Chinese traders of some Australian goods. Many are reporting that Australian wine exporters have reported hearing advice from their import partners in China that “no product will be cleared through customs from Friday. It is also rumored that Chinese import businesses are also introducing new curbs on shipments of Australian lobster, sugar, coal, timber, wool, barley, and copper.
Our market is expected to open higher following strong leads from the U.S last night and their positive futures this morning. Our open should see us near 6100 – roughly the high of yesterday.
Despite the race being extremely close and not called yet, markets are showing strength, with the U.S getting close to their all-time highs. The strength may continue on the back of a Biden win. On the other hand, it may end in tears if it looks like congress is headed back to grid lock with the Dems holding the House and the Republicans holding the Senate, with only the presidency swapping sides. In addition, at this stage, the margin in the house and senate looks like it may get smaller, making majorities harder to obtain. Of course, this uncertainty may lead to falls and the past few days are shored up as simple a pump and dump. We will not know until the dust settles the coming days, but one thing seems more certain than others: high volatility.
Outside the election, news focus has also shifted to Chinese boycotts of Australian imports. Though not official, apparently Chinese importers are to boycott Australian products this Friday, bar Iron Ore. This will include Timber, cotton, wine, lobster, copper, barley, sugar, coal and many more. Obviously, this further harms our relationship with our main trading partner.
Overnight US shares shrugged off the election uncertainty and rose strongly. The big news remains the presidential election, which is still yet to be decided, with the results likely to come down to a handful of electoral college votes. Book makers are now suggesting that Democratic candidate Joe Biden has the path to victory. Markets are expecting a democratic party president to spend more on the stimulus front, and perhaps that is what helped US markets push that much higher overnight.
Economic data overnight showed an increase in the US trade deficit for September, but a bigger drawdown in US crude oil inventories than expected. Technology and Healthcare stocks did the heavy lifting overnight, while Oil & Gas stocks were fairly flat, every other major sector closed lower, with Basic Materials and Utilities the worst performers.