Global markets rally as US election underway, dollar under pressure

Major stock markets saw gains Tuesday, while the U.S. dollar remained under pressure, as Americans cast their votes in a closely contested presidential election.

Wall Street’s main indexes rebounded after declines on Monday, while European markets showed mixed performances.

US, European markets

• On Wall Street, early trading saw a rebound across major indexes, with investors keeping a close watch on the election in the world’s largest economy.
• In the U.S., the Dow Jones, S&P 500, and Nasdaq all posted gains, with Nasdaq leading at 0.8%. European markets were mixed.
• In Europe, London’s FTSE 100 dipped ahead of the Bank of England’s interest rate decision on Thursday. Paris and Frankfurt edged up in afternoon trading.

Asian markets rally

• In Asia, equities in Shanghai and Hong Kong rallied, buoyed by optimism about China’s economy. Both markets closed over 2% higher, fueled by data showing the fastest expansion in China’s services sector since July.
• Traders are also anticipating an economic stimulus package from the Chinese government, with expectations of $140 billion in additional budget spending and relief for banks.

Currency movements

• The U.S. dollar weakened against major currencies, including the euro, British pound, and yen.
• Analysts are cautioning that a contested election result could introduce market volatility, while a clear winner could bring temporary relief to investors.

“A pro-tariff Trump presidency could see the dollar strengthen amid concerns higher inflation will prompt the Fed to keep interest rates higher,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.

Market sentiment during US elections

• Republican nominee Donald Trump is expected to reintroduce inflationary pressures if he wins, because of his pledges to cut taxes and impose tariffs on imports, which could drive Treasury yields higher and boost the dollar.
• A win for Democratic Vice President Kamala Harris is seen by analysts as bringing less upheaval to the markets.

Fawad Razaqzada, an analyst at City Index, noted that the election outcome remains uncertain. “As things stand, it looks like a photo finish. This makes it extremely difficult to predict the direction of the dollar or stocks this week,” he said.

Oil prices, corporate news

• Oil prices continued to rise, building on Monday’s 3% surge after top producers agreed to extend output cuts through December and amid concerns over the Middle East crisis.
• On the corporate front, Boeing shares fell slightly despite a deal with striking workers, ending a seven-week stoppage that highlighted workforce dissatisfaction at the U.S. aviation giant.

Investors remain focused on the election results and upcoming Federal Reserve meeting, where a rate cut is expected in response to cooling inflation.