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Markets Mixed after Debate

The Catch Up

- Stocks were all over the place today as investors remained worried about the outcome of the US presidential election and await new developments in stimulus talks in the US.

- Chinese shares continue to drop with the CSI300 down by 0.4%, despite an initial rise, and the ASX falling by 0.1%. On the other hand, the Nikkei was up by 0.4% and the US500 was flat.

- Yesterday, the final debate between US President Donald Trump and the Democrat candidate Joe Biden was pretty much as expected, and reinforced investor caution. Biden renewed his criticism of Trump's handling of the coronavirus pandemic as Trump continued with corruption accusations at Biden and his family.

- Analysts note that there was no new information, hence why the markets were not moving much. The focus still remains on whether a fiscal stimulus will take place, how big it will be and what its timing will be. House of Representatives Speaker Nancy Pelosi reported progress in talks with the Trump administration for another round of financial aid, saying legislation could be hammered out "pretty soon" but refrained from offering more details.

- While the news lifted share prices, the S&P500 is still down 0.9% so far this week amid uncertainties over stimulus and the election.

- A widening lead in polls by Biden is prompting many investors to bet on a Biden presidency and also a "blue sweep", where Democrats win the both chambers of Congress. As it is noted, a Biden win and a split Congress may imply another four years of limited policy changes.

- Still, a "blue sweep" may not be good for everyone: Nasdaq, which had led the market's rally, has underperformed lately, having lost 1.4% so far this week, as a Democrat administration could take a harder stance on big tech firms.

- Expectations of bigger government stimulus have also increased US borrowing costs, as 10-year US Treasuries rose to a 4.5-month high of 0.870% and were last at 0.853%.

- Data were also on the positive side, with jobless claims falling by more than expected and existing home sales exceeding estimates to more than a 14-year high.

- In the currency market, the US Dollar moved away from its seven-week low hit on Wednesday, but remained under pressure as investors began to wager on a Biden presidency and big US stimulus. The euro traded at $1.1803, just off Wednesday's high of $1.1805 but still up 0.7% on the week.

- The yen was at 104.77, easing a bit after its biggest gain in nearly two months on Wednesday. Similarly, the Chinese yuan stood at 6.6729 in offshore trade, around 50-pips below a 27-month high seen on Wednesday.

- Oil prices held on to gains after Russian President Vladimir Putin made it clear that he would be prepared to extend record supply cuts in the face of the Covid-19 pandemic. Brent was last at $42.45 per barrel and WTI stood at $40.61.

- Gold was up on Friday morning in Asia, despite a stronger dollar, as investors continued to monitor progress on the latest stimulus measures.

- Earlier today, Australian manufacturing and services PMIs were worse and better than the previous month respectively, underlining that the worst may still not be over with regards to Covid-19. On the other hand, in Japan, the manufacturing and services PMIs were both improved since the previous month but still below the 50 threshold.

- In the UK, retail sales were much better than expected, with the September figures rising by 4.7%y/y.

The Look-Out

- It's PMI day in Europe, with services in Germany and France expected to have registered a decline compared to the previous month and remain below 50. On the other hand, manufacturing is forecast to have dropped but to remain above 50.

- The UK PMI is also forecast to have lost ground, with services registering the biggest change, from 56.1 to 53.4.

- In the US, no major change is expected in the PMI releases.

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