This week, global monetary policy will be influenced by key interest rate decisions from several central banks, including the Fed and the Bank of England. China’s National People’s Congress will also meet, potentially revealing new stimulus measures. Asian markets saw limited trading due to Japan’s holidays, but the MSCI Asia-Pacific index rose 0.7%. The US dollar weakened, partly due to shifting political dynamics surrounding the upcoming elections. In commodities, oil prices rose after OPEC+ postponed a planned production increase.
This week presents significant global monetary policy triggers for investors, highlighted by interest rate decisions from the Federal Reserve, the Bank of England (BoE), the Reserve Bank of Australia (RBA), the Riksbank, and the Norges Bank.
The Standing Committee of the National People’s Congress (NPC) of China will meet from November 4 to 8, and market participants will be closely monitoring the details of several recently announced stimulus measures.
Trading volume was subdued in Asia on Monday due to Japan’s holidays, yet the broader MSCI Asia-Pacific index, excluding Japan, rebounded by 0.7%, recovering from a five-week low reached on Friday.
In contrast, U.S. stock futures declined, with the Nasdaq down 0.11% and the S&P 500 dropping 0.14%.
The dollar weakened, with the euro climbing 0.4% to $1.0877 and the yen gaining 0.7% to 151.88 per dollar.
Market analysts suggested the dollar’s dip could be connected to a respected poll showing Democratic candidate Kamala Harris unexpectedly leading by 3 points in Iowa, largely attributed to her popularity among female voters.
However, Ms. Harris and Republican candidate Donald Trump remain nearly tied in the polls ahead of Tuesday’s election, with the results likely not being known for several days after votes are cast.
“At the start of last week, we estimated a 48% chance of a red sweep… that number has dropped to around 36% this morning according to Polymarket. Thus, the probability of a Republican victory has significantly decreased… the Democrats have evidently caught up,” stated Tony Sycamore, a market analyst at IG.
“As a result, we are witnessing a part of the dollar rally from the ‘Trump trade’ slowly leaving the market.”
Analysts believe that Trump’s policies on immigration, tax cuts, and tariffs would exert inflationary pressures on the economy, bond yields, and the dollar, while Harris is viewed as a candidate of continuity.
Spot trading on U.S. Treasury bonds was paused in Asia due to the holidays in Japan, although futures rose by 10 points.
CHINA, INTEREST RATES
Aside from the U.S. elections, the NPC’s upcoming meeting will also be a focal point for investors.
Chinese stocks opened positively on Monday, with the CSI300 index gaining 0.2%, while the Shanghai Composite index increased by 0.04%.
The Hang Seng Index in Hong Kong rose by 0.4%.
According to Reuters, the country is considering approving the issuance of over 10 trillion yuan (approximately $1.4 trillion) in additional debt over the coming years to stimulate its fragile economy during the meeting, a fiscal package that may be bolstered should Trump win the election.
“Addressing local government debt is beneficial for financial stability, but it mainly involves transferring debt to the central government’s balance sheet, so it will not greatly impact demand,” stated Leah Fahy, China economist at Capital Economics.
Among the many central bank meetings this week, the Fed is in the spotlight, with markets expecting a 25 basis point rate cut.
The BoE’s meeting is set for Thursday, with expectations for a 25 basis point rate reduction, although its decision has been complicated by a heavy sell-off of gilts following last week’s Labour government budget, which also led to a decline in the pound.
The pound sterling was up 0.4% to $1.2971, supported by a weaker dollar, after a drop of 0.3% last week.
In commodities, oil prices surged by over a dollar after OPEC+ announced on Sunday that it would delay a planned production increase set for December by one month.
Brent futures rose by $1.18 per barrel, or 1.61%, to $74.28. U.S. West Texas Intermediate (WTI) crude also increased by $1.18 per barrel, or 1.7%, to $70.67.
Spot gold climbed by 0.1% to $