Increased political uncertainty drags markets lower - 31.10.2016

US stocks end lower on Clinton email probe reopening

US stocks closed marginally lower on Friday on added uncertainty about election outcome after the Federal Bureau of Investigation announcement it was restarting a probe into Hillary Clinton’s emails. The dollar slipped with higher political uncertainty after markets had priced in a likely victory of Democratic candidate Clinton after her lead in polls over Republican candidate Trump following presidential debates.

The live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six major currencies, fell 0.29% to 98.329. The S&P 500 ended 0.3% lower settling at 2126.41. The Dow Jones industrial average slipped 0.05% to 18161.19 and the Nasdaq ended 0.5% lower at 5190.10. The S&P retreated 0.7% for the week while the Nasdaq lost 1.3%. The Dow ended higher for the week, posting less than 0.1% gain over the past five sessions. Stocks ended lower after choppy trade on mixed corporate reports, with mixed economic data failing to buoy investor confidence. A preliminary read for the third quarter indicated gross domestic product rose at 2.9% annual rate, accelerating to the fastest pace since mid-2014, after only 1.4% growth in the previous quarter. However, consumer confidence slipped from the prior month in line with weaker readings recently, but market reaction was muted. Market participants deemed the economic data were less supportive of a Fed rate hike soon: the fed fund futures traders priced in a roughly 74% chance of a rate hike at December meeting, lower than the over 78% likelihood the previous day, according to the CME Group’s FedWatch tool. Investors don’t expect a rate hike at two-day Federal Reserve meeting which starts tomorrow, ahead of the presidential elections. Today at 13:30 CET September Personal Income and Personal Spending will be released in US. The tentative outlook is positive for dollar.

HSI

No surprises in euro-zone corporate reports

European stocks closed lower on Friday as weak corporate reports didn’t indicate a break in recent negative trend. Both the euro and Pound strengthened against the dollar. The Stoxx Europe 600 fell 0.3%, recording 1% loss for the week.

Germany’s DAX 30 finished 0.2% lower at 10696.19. France’s CAC 40 outperformed gaining 0.3% as the gross domestic product expanded 0.2% in the third quarter after 0.1% contraction in second. In other economic data the consumer spending fell unexpectedly in September by 0.2% in France and inflation rose to the highest level in two years in October in Germany, with consumer prices rising 0.2% on the month. The UK’s FTSE 100 added 0.1% to 6996.26. Today preliminary data showed euro-zone economic growth came in steady at 1.6% over year in the third quarter and headline inflation edged up to 0.5% in October due to a smaller decline in energy prices. Nevertheless, stocks are trading lower led by bank and energy stocks.

Japanese industrial production slows down

Asian stocks fell today weighed by higher US presidential election uncertainty after the FBI announced it will restart a probe into how Democratic presidential candidate Hillary Clinton used her email. Nikkei closed 0.1% lower at 17425.02 today despite weaker yen against the dollar with industrial production and retail trade at 0.9% and -1.9% over year respectively in September missing expectations. Trading was thin with trading volume hitting a four-year low. Both the Shanghai Composite Index and the Hong Kong’s Hang Seng index ended 0.1% lower. Australia’s All Ordinaries Index lost 1.1% while the Australian dollar edged higher against the dollar.

Oil slide continues as producers fail to agree on output cuts

Oil futures prices are extending losses today after non-OPEC producers made no specific commitment to join OPEC in limiting oil output levels to support prices. Officials and experts from OPEC countries and non-OPEC producers Azerbaijan, Brazil, Kazakhstan, Mexico, Oman and Russia met for consultations in Vienna on Saturday and only agreed to meet again in November before a scheduled regular OPEC meeting on November 30. Traders find it not much likely major oil producers will succeed in agreeing to output cuts at OPEC meeting in Vienna November 30. Various members have requested to be exempted from the output cuts and some have a record of not honoring their commitments in the past. December Brent crude fell 1.5% to $49.71 a barrel on Friday, with the global benchmark down 4% for the week.