Political uncertainty weighs on markets - 3.11.2016

US stocks fall for seven sessions in a row

US stocks ended lower on Wednesday with investor risk appetite undermined by heightened uncertainty about presidential election outcome. The Federal Reserve kept interest rates unchanged as widely expected. The dollar continued the slide: the live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, closed 0.38% lower at 97.364. The S&P 500 ended 0.7% lower settling at 2097.94 led by real estate shares. The Dow Jones industrial average slipped 0.4% to 17959.64, closing below the 18000 level for the first time since July. The Nasdaq dropped 0.9% to 5105.57.

The S&P 500 slid from nearly four-month lows on Tuesday, recording the longest losing streak of seven straight sessions since 2011, as the ABC News-Washington Post tracking poll showed Republican candidate Donald Trump gained a one-point lead over Democratic nominee Hillary Clinton. The Fed stated it chose not to hike rates and wait for some further evidence of further progress toward its objectives noting that “the case for an increase in the federal-funds rate has continued to strengthen”. In economic news data came in weaker than expected: private-sector employers added 147000 private sector jobs last month, less than the previous month and below the expected 165000 number, Automatic Data Processing reported. Today at 13:30 CET Initial Jobless Claims and Continuing Claims will be released, the tentative outlook is positive for dollar. At 14:45 CET October final Services PMI by Markit will come out, the outlook is neutral. At 15:00 CET October ISM Services PMI will be published, the outlook is positive. At the same time September Factory Orders are expected to come out steady at 0.2%. And at 15:30 CET Natural Gas Storage Change will be released by the Energy Information Agency.

Bank of England to leave policy unchanged

European stocks closed lower on Wednesday with investor confidence undermined by political uncertainty after Democratic candidate Clinton’s lead over Republican rival Trump narrowed and positive data and corporate reports failed to boost market sentiment. The euro and Pound continued to strengthen against the dollar. The Stoxx Europe 600 fell 1.1%. Germany’s DAX 30 dropped 1.5% to 10370.93. France’s CAC 40 lost 1.2% and UK’s FTSE 100 index closed 1% lower at 6845.42.

Concerns about uncertainty in case Donald Trump wins the US presidential election outweighed positive economic reports: the German unemployment rate fell to a record low of 6% in October and the final euro-zone Manufacturing Purchasing Managers Index for October came in at 53.5, above the flash estimate of 53.3 and better than the 52.6 recorded in September. Today at 10:30 CET October Services and Composite PMIs will be released in UK. The outlook is negative for Pound. At 11:00 CET October Unemployment Rate for euro-zone will be published, the outlook is positive for euro. And at 13:00 CET Bank of England Rate Decision and Inflation Report will be published. No change in monetary policy is expected: the Official Bank Rate is expected to remain at 0.25% with asset purchases continuing at 435 billion Pounds annually. At the same tome the ECB will publish its Economic Bulletin

Chinese services sector continues expanding

Asian stocks are mixed today with cautious mood prevailing after polls showed Democratic candidate Hillary Clinton’s lead in polls over rival Trump narrowed. Chinese stocks are mixed despite a positive report the activity in China’s service sector expanded at a faster pace in October with the Caixin China services purchasing managers index rising to 52.4 in October from 52.0 in September. A reading above 50 indicates expansion while a reading below that points to a contraction. The Shanghai Composite Index is 0.8% higher while the Hong Kong’s Hang Seng index is 0.3% lower. Australia’s All Ordinaries Index ended 0.1% lower as the Australian dollar edged higher against the dollar. Japan’s markets are closed for a holiday.

Nikkei

Oil tumbles on record US inventories build

Oil futures prices are extending losses paring earlier gains today after militants in Nigeria's southern Niger Delta oil hub attacked a pipeline operated by the Nigerian National Petroleum Corporation on Wednesday. Prices fell to five week low yesterday after data showed US crude inventories soared more than 14 million barrels last week, the largest weekly build since the US Energy Information Administration started keeping records in 1982. January Brent crude fell 2.7% to $46.86 a barrel on Wednesday on London’s ICE Futures exchange.