Dol­lar shakes off Clin­ton probe, stocks shaky

Kuwait Times - - BUSINESS -

The dol­lar stead­ied but stock mar­kets re­mained wob­bly yes­ter­day af­ter news the FBI was in­ves­ti­gat­ing more emails linked to Hil­lary Clin­ton’s use of a pri­vate server while she was sec­re­tary of state. The weak­est Ger­man re­tail sales in two years, a dip in oil prices and one of the tough­est month in years for bond mar­kets all made for a shaky ses­sion in Europe, where the STOXX 600 in­dex dropped 0.4 per­cent.

Wall Street looked set for a sub­dued restart too, hav­ing been hit by the news of the FBI moves on Fri­day, though a string of M&A deals in­clud­ing one in­volv­ing the oil and gas arm of Gen­eral Elec­tric pro­vided some sup­port. MSCI’s 47-coun­try ‘All World’ in­dex was also flat and head­ing for a 1.7 per­cent drop in Oc­to­ber. That would be its first monthly fall since June and its worst month since a global shake­down in Jan­uary.

The dol­lar saw a re­cov­ery how­ever, ris­ing against the yen, euro and ster­ling on the day and head­ing for its best month - up 3.2 per­cent - against the world’s top cur­ren­cies in just un­der a year.

The FBI an­nounce­ment has thrown open the US pres­i­den­tial race and given new hope to Clin­ton’s Repub­li­can ri­val Don­ald Trump that he can beat her on Nov 8. “The Clin­ton story of course has had an im­pact,” said Richard Ben­son, co-head of port­fo­lio man­age­ment at cur­rency fund Mil­len­nium Global in London. “The polls are now roughly 50-50, but the prob­a­bil­i­ties are still hugely in fa­vor of Clin­ton, given how the votes are spread out (per state). The ques­tion is whether peo­ple de­cide to re­duce risk ahead of the elec­tion.”

US Fed­eral in­ves­ti­ga­tors have se­cured a war­rant to ex­am­ine newly dis­cov­ered emails, a source told Reuters on Sun­day. Clin­ton had opened up a lead over Trump in na­tional polls, but it had been nar­row­ing even be­fore the email con­tro­versy resur­faced. An ABC News/Wash­ing­ton Post poll re­leased on Sun­day showed Clin­ton with a sta­tis­ti­cally in­signif­i­cant 1-point na­tional lead.

The Mex­i­can peso, which has be­come a mar­ket proxy for the Clin­ton/Trump race, also re­bounded in Euro­pean trad­ing af­ter be­ing knocked on Fri­day.

South Africa’s rand ral­lied too as fraud charges were dropped against the fi­nance min­is­ter, though emerg­ing mar­ket stocks strug­gled more broadly as the end of their four-month win­ning streak loomed.

The euro dropped to $1.0952 as data showed the eu­ro­zone econ­omy grow­ing at the same slow pace in the third quar­ter as it had in the sec­ond, and core in­fla­tion dip­ping, re­in­forc­ing ex­pec­ta­tions the Euro­pean Cen­tral Bank will ex­tend its as­set-buy­ing pro­gram in De­cem­ber. The jit­tery mood nudged in­vestors back to­wards safe-haven govern­ment bonds, but it has been the op­po­site story for most of the month.

Ger­man govern­ment bond yields were on track to end Oc­to­ber with their big­gest monthly rise since 2013, with sen­ti­ment frag­ile ahead of cen­tral bank meet­ings this week and fol­low­ing the euro zone’s eco­nomic and in­fla­tion data.

US Trea­sury yields, which hit five-month highs last week, were poised for the big­gest monthly rise since Fe­bru­ary 2015, while for Bri­tain’s gilts yields have risen al­most 50 ba­sis points, the big­gest jump since Jan­uary 2009. “Re­cent sharp falls in ster­ling’s value vis-‡-vis the euro and the US dol­lar could re­duce con­fi­dence in ster­ling and even­tu­ally threaten its role as a global re­serve cur­rency,” said Stan­dard and Poor’s, which re­viewed the UK’s credit rat­ing on Fri­day.

“We could lower the rat­ing if we con­clude that ster­ling will lose its sta­tus as a re­serve cur­rency.”

Asian stocks strug­gle

Asian traders moved cau­tiously yes­ter­day as news that the FBI would fur­ther probe Clin­ton’s emails fu­elled fresh un­cer­tainty about the out­come of the US pres­i­den­tial elec­tion just eight days be­fore the vote. Traders glob­ally had broadly ex­pected Demo­cratic can­di­date and Wall Street fa­vorite Clin­ton to sweep to vic­tory, with her ri­val Don­ald Trump con­sid­ered a loose can­non.

But FBI chief James Comey’s an­nounce­ment that the bureau was again look­ing at her use of a pri­vate email server while sec­re­tary of state sent shud­ders through trad­ing floors, with US stocks tum­bling and the dol­lar tak­ing a hit. The sell-off fil­tered through to Asia, where deal­ers are also ner­vously await­ing a series of key events this week, in­clud­ing cen­tral bank pol­icy meet­ings in Ja­pan and the US and the re­lease of US jobs fig­ures Fri­day. Trad­ing con­di­tions this week will be “slip­pery and shifty”, said Stephen Innes, se­nior trader at forex firm OANDA.

“The cal­en­dar is full of high-risk events mak­ing for a treach­er­ous path to nav­i­gate in the lead-up the mon­u­men­tal Novem­ber 8 US elec­tion,” he said in a note. Tokyo’s Nikkei ended 0.1 per­cent lower, Hong Kong shed 0.1 per­cent and Shang­hai also closed 0.1 per­cent off, while Seoul slipped 0.6 per­cent and Taipei was 0.2 per­cent off. — Agen­cies

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