It was a bit of a mixed day for the global financial markets yesterday with most financial products trading in recent ranges ahead of some big event risk. The Asian markets had experienced a tough start to the day with most of the indices finishing firmly in the red, however more positive moves came through as the day progressed and the US markets closed more strongly, although the Nasdaq and tech stocks lagged well behind after a story the Apple won’t be boosting production numbers of its newest phone. The US mid term elections take place later today and there is a huge market focus on the outcome and how it will affect the Presidents power base moving forward and his ability to implement policy. It’s expected that the democrats may take control of the House of Representatives with the Republicans maintaining control of the Senate with anything out of expectation set to add volatility to the markets.
The main event risk for the Asian session is the Reserve Bank of Australia’s latest Cash Rate Announcement. However, once again there is close to zero chance of a rate change and local investors looking to make money today will probably be focussing more on the Melbourne Cup which takes place 30 mins after the announcement. Despite this situation, market participants will be paying close attention to the accompanying rate statement for any subtle changes in the forecast from the bank and this could add some volatility to the currency at the very least.
Later in the day the focus will start to build up to the Mid Terms in the US as it is relatively quiet on the data front. As we indicated above, if there does look to be a change in the status quo or in market expectation then we should start to see markets move. In the past, the mid terms have been a good base for equity indices as the once they are over and the market has more certainty on the set up of the government then normal service can resume. However, many analysts will say that this presidency has been far from normal and given what we’ve seen from President Trump over the last two years it’s fair to say that it his power base is affected one way or another then we should see a shift in policy – and this is what the market is most interested in and concerned about.