In a volatile session, European stock markets opened lower on Wednesday, pared opening losses to post modest gains, but have nearly given up those gains afterward. Markets have now pared Trump's odds of winning to 50%, after having it around 71% as Wisconsin vote count started to favor Biden. Earlier in the day, investors were spooked by Trump’s claims of victory as well as fraud, fueling uncertainty over the outcome of the election, with many votes remaining to be counted. At the moment, neither candidate yet has the 270 electoral college votes needed to win. Furthermore, concerns are rising that Congress will remain split between the two big parties, as it looks increasingly unlikely that the Democrats will regain control of the Senate. Elsewhere, fresh economic data showed that the Eurozone September PPI came in at+0.3%, in line with expectations, having improved from +0.1% in the previous month. Final services PMI arrived at 46.9 in October versus 46.2 in a preliminary estimate. In the UK, October final services PMI came in at 51.4 versus 52.3 preliminarily. Despite just slightly softer revisions to the initial estimates, the report reaffirms that the UK economy has lost steam ahead of the fourth quarter, and things could get worse going ahead considering a return to lockdown in November. This in turn increases the odds of taking action by the Bank of England later this week.
Against this backdrop, the UK FTSE 100 index adds 0.30% to 5,760, Italy’s FTSE MIB sheds 0.06 percent to 18,974, France’s CAC 40 edges higher by 0.55 percent to 4,831, while the German DAX 30 edges higher by 0.27% to 12,121. U.S. stock index futures are pointing to mixed dynamics, as S&P 500 futures have pared a 1% earlier drop to flat levels while Nasdaq futures are seeing gains of nearly 2% and S&P 500 futures are still up by 0.3%, with risk appetite remaining fragile.
In currencies, the greenback has pared earlier gains but remains positive for the day on Wednesday ahead of the final presidency results. EURUSD jumped to 1.1770 earlier in the day but failed to extend the upside movement and retreated to the levels last seen in late-July around the 1.1600 handle that acted as support and triggered a bounce to 1.17. As of writing, the pair was slightly lower on the daily basis, clinging to the mentioned figure. Later in the day, the euro could be affected by the US ADP employment report. The release is expected to show another large increase in employment numbers. If so, the safe-haven dollar could come under local pressure. However, the data could have a limited impact on the market as the focus remains on the presidential election result.
Meanwhile, oil prices extend the recovery seen at the start of the week, flirting with the 200-DMA ahead of the opening bell on Wall Street. A break above this moving average (today at $40.55) could pave the way to the 20-DMA that arrives at $41.45. The catalyst for the latest move higher came from the US, as the API reported a surprise major draw in crude oil inventories of 8.01 million barrels for the week ending October 30. Later today, the EIA data could add to the upbeat tone in the market if strong numbers are confirmed.
Nathan Lambert, Head of Global FX Analytical Department