Emmanuel Ochayi
Global Markets Respond to US Election Uncertainty
Global markets opened higher on Monday, driven by expectations around the approaching US election. Investors worldwide are paying close attention to the outcome, which will impact not only the presidential race but also control of Congress.
Join our WhatsApp ChannelThe election’s outcome is expected to influence policies on taxes, tariffs, and international relations, particularly with China.
US Election Impacts Dollar and Oil Prices
The dollar dipped against other major currencies on Monday, reacting to new poll data from Iowa, showing Democratic candidate Kamala Harris with a narrow lead over Republican Donald Trump. The currency shift highlights investors’ anticipation that Harris’s policies may be less dollar-favourable compared to Trump’s proposed tax cuts and tariffs, which traditionally support a stronger dollar.
“The market is really hanging on every development in this US election,” says Peter Esho, founder of Esho Capital. “If Republicans gain control of both the Senate and the House, we could see fiscal changes with potential long-term impacts on yields.”
Oil prices, on the other hand, rose by 2.5%, bolstered by the recent commitment from eight OPEC+ countries to extend supply cuts. These cuts are seen as a hedge against a slower global demand, especially as the US and Chinese economies display signs of slowing growth.
Key Polls and Candidates’ Economic Plans
Investors are keeping a close watch on polling results as the US election nears. The close race between Harris and Trump is raising questions about the future of US fiscal policies. Trump’s pledges include a plan to reduce corporate taxes and implement tariffs, while Harris’s platform focuses on social spending and international collaboration. Economists believe that the Republican candidate’s economic policies could lead to a surge in dollar strength and treasury yields.
Market analyst Joshua Mahony from Scope Markets explains, “This is possibly the most critical week of the year for investors worldwide. The US election will set the stage for the next phase of market movements.”
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The Senate and House races are also critical, with a “Republican sweep” signaling more significant changes to fiscal policies, potentially raising yields and impacting bondholder strategies.
Federal Reserve Meeting Adds to Election-Week Tensions
Adding to this high-stakes week, the Federal Reserve is scheduled to make an interest rate decision that could further impact market behaviour. Analysts expect a 25-basis-point reduction following the previous 50-point cut. Investors speculate that the Fed’s decision will be influenced by the outcome of the election, with potential implications for inflation and employment.
In parallel, Beijing is monitoring the US election as it formulates its latest economic stimulus package. Ting Lu, chief economist at Nomura, noted, “US election results will likely influence China’s decisions, particularly if the new administration is perceived as taking a hard line on trade policies.”
Oil Markets Gain as Geopolitical Tensions Rise
Oil prices received an additional boost following threats from Iran in response to a recent strike by Israel. Ayatollah Ali Khamenei’s warning that the US and Israel could expect “a tooth-breaking response” has heightened global supply concerns, especially in the Middle East. The threat adds another layer of volatility to an already complex market influenced by the US election and OPEC’s production strategies.
Market Responses and Economic Indicators
Across global markets, Monday trading reflected investor confidence despite the uncertainties. Key indices in Europe and Asia showed gains, with Paris’s CAC 40 up by 0.4% and Hong Kong’s Hang Seng Index up by 0.3% at close. In the US, the Dow Jones Industrial Average closed with a 0.7% increase.
Meanwhile, the euro strengthened against the dollar, rising to $1.0902, while the pound also gained, trading at $1.2964. Analysts attribute this strength to investor confidence in European markets, which have largely stabilised ahead of the US election.
Oil benchmarks showed positive momentum as well, with Brent North Sea crude up 2.3% at $74.80 per barrel and West Texas Intermediate climbing 2.5% to $71.20.
US Election’s Global Economic Impact
The US election remains a critical event for global markets, with investors bracing for changes in international trade relations and currency policies. A Republican win, especially a sweep of Congress, could usher in aggressive fiscal changes, impacting bond yields and potentially increasing Treasury yields.
As both presidential candidates make strong promises on economic policies, investors worldwide are preparing for shifts in markets and currencies that reflect the US election’s influence on global finance.
