Global Equities Track Positive Overnight

STOCK INDEX FUTURES

While global equity markets tracked positive overnight, the US markets recently have remained off balance and seemingly poised for further declines. Certainly, investors are justified in reducing their exposure because of the highly uncertain outcome of the election and the subsequent reactions of the US electorate to the results. However, the settlement of the Boeing strike overnight, the prospects of a rate cut on Thursday and getting beyond the election should provide some cushion for prices. In slightly negative corporate headline developments Netflix saw its offices in France and the Netherlands raided for a preliminary investigation into tax fraud laundering charges, Walgreens agreed to pay a $100 million fine in a class action lawsuit for overcharging customers for certain generic drugs and South Korea fined Meta $15 million over the collection of user data.

CURRENCY FUTURES

In retrospect, it appears that the dollar fell from favor at the beginning of last week as if the trade was aware of the softening of the US economy. However, it is also possible that traders were banking profits from the massive 460 point late September through late October Dollar rally rather than risk giving back those gains from a highly uncertain election result. On the other hand, a compacted jump in initial claims two weeks ago, a very disappointing October Non-Farm payroll report and minimal softening of 3^rd tier US inflation measures fundamentally justifies the dollar slide from last week’s high. It should be noted that trade has already factored in massive euro and Mexican peso volatility as those two US trading partners are obviously poised to see different impacts depending on which party prevails in the US election. It should be noted that the Chinese yuan fell from a three-week high overnight indicating profit-taking from the Chinese stimulus announcement.

INTEREST RATE MARKET FUTURES

With early reports that some “Trump” Treasury trades were being unwound, volatility in treasuries could moderate in today’s early trade especially with today’s early US scheduled economic report slate mostly focused on rearview mirror Goods and Services trade balance readings. However, US markets will also be presented with US S&P global composite and services PMI readings for October, but economists are predicting unchanged readings from last month thereby adding to the potential for narrow ranges in the morning trade. Later in the morning trade, the markets will be presented with US ISM services employment, services new orders, and overall services PMI readings with economists predicting a slight softening of services and a slight moderation of services prices paid. At midsession, a 10-year note auction result will likely have little impact on the trade as we expect media outlets to be hinting at projections for the election result despite expectations that it could be days before the outcome is known. Obviously, volatility in treasuries will be somewhat restrained by the FOMC rate decision on Thursday but one should not rule out the trade focusing intently on ISM services prices paid inflation reading today.  In the end, with December bonds trading roughly 10 full points below the September 17th high and building a sideways consolidation over the last two weeks, the bull camp might have a slight technical edge.

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