(Bloomberg) — Asian equities were softer in early trading amid increasing risk-off sentiment, as the clock ticks down to a tight US election and the Federal Reserve rate decision.
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Stocks in Sydney and Seoul slipped, pushing a regional index into the red. Tokyo’s benchmark gained following a public holiday. The Bloomberg Dollar Spot Index was flat, while the 10-year Treasury yield was little changed.
The presidential vote looms large for financial markets this week, as polls show Americans narrowly split between Donald Trump and Kamala Harris. The likelihood of a disputed result may drag the vote count out for weeks or even months, spurring a potential rise in volatility.
There are additional catalysts likely to move the market. Election Day will quickly be followed on Thursday by the Fed decision and Jerome Powell’s press conference, where he’ll give details on the central bank’s interest-rate path. A big chunk of US firms are due to report earnings.
“Normally, the Fed rate announcement would dominate the week’s discussion, but this isn’t just any week,” said Chris Larkin at E*Trade from Morgan Stanley. “Traders and investors who have been waiting for the outcome of the election have to prepare themselves for the possibility of a delayed outcome, and the potential impact of that uncertainty on the markets.”
In Asia, attention is on the second day of China’s meeting of the National People’s Congress’ Standing Committee, where the government is widely expected to unveil its latest stimulus package to boost the economy. Beijing’s top legislative body has already reviewed a proposal to transfer some off-balance-sheet debt of local governments to their official accounts, aiming to ease their financial burden. The Nasdaq Golden Dragon China Index closed up 1.1% in the US.
In Japan, a key potential ally for the weakened government, Yuichiro Tamaki, said the central bank shouldn’t raise interest rates again before March, urging it to closely examine the results of next year’s wage deal results before moving on policy again. The yen slipped. Japanese stocks will get an additional 30 minutes of trading.
Meanwhile, Australia’s central bank is poised to keep interest rates at a 13-year high, marking a year of unchanged policy as it grapples with a slow pace of disinflation and mounting global risks capped by a tight US election.