Live updates: Australian share market to rise as Wall Street rallies on election day

The CBA’s Joseph Capurso has put out a note this morning on currencies and the US election.

Here’s some analysis on AUD/USD:

AUD/USD lifted again overnight to 0.6635. AUD lifted against all the cross rates too … We expect AUD/USD to be heavily influenced by the count in the US election. We expect AUD/USD to lift if Vice President Harris wins, and AUD/USD to fall if President Trump wins. It could be a wild ride for currencies, and financial markets generally, today.

USD eased despite better than expected US economic data overnight.  We interpret the decrease in the USD as positioning for a win by Vice President Harris. The services ISM surged to a strong 56pts in October.  The index was at the highest since the middle of 2022.  The prices paid and employment components were also strong.  Nevertheless, market pricing for a 25bp cut in the Funds rate on Friday remains very high.

The US election will be the larger driver of the USD for the remainder of the week in our view.  All the evidence suggests the election outcome is difficult if not impossible to call.  Even the betting markets predict different winners.  The election matters because the winner will influence the trajectory of US economic activity and inflation with their policy platform. We expect the USD to lift if President Trump wins and the USD to fall if Vice President Harris wins.

US stocks have closed sharply higher in a broad rally after data signaled a solid economy, but investors braced for volatile trading this week as voting began in an extremely tight US presidential election.

The Institute for Supply Management said its non-manufacturing purchasing managers index, a gauge of the services sector, accelerated to 56.0 last month, its highest since August 2022, from 54.9 the prior month and above the 53.8 expected by economists polled by Reuters.

The election outcome could take days to be finalised as the latest polls showed the race between Republican Donald Trump and Democrat Kamala Harris, which has moved markets in recent months, was too close to call.

The former president’s odds improved on Tuesday in betting markets that many investors consider as election indicators.

“The market continues to try and price for what is the outcome of this election,” said Rob Haworth, senior investment strategist at US Bank Wealth Management in Seattle.

“It’s been so tight and even if we look at the price range we’ve been in, we’ve been in a tight price range, and so what’s really moving us is marginal positioning for one result or the other.

“Both the bond market and the equity market are looking at Congress as important as well,” he added. “Most base cases are for divided government, but this election is so close we could get any outcome, that’s the challenge.”

Volatility was more pronounced in government debt and currency markets. The benchmark 10-year US Treasury note yield rose more than 10 basis points to a high of 4.366% before paring gains on a solid auction, and was last down slightly on the day.

Equity markets avoided Monday’s volatility on expectations of a soft landing for the economy, bolstered by corporate earnings, lower interest rates and a resilient labor market.

Other economic data on Tuesday showed the trade deficit hit a 2-1/2 year high in September, as domestic demand draws in imports while concerns about higher tariffs under a Trump presidency have led to a front loading of imports by businesses.

The RBA left interest rates at 4.35 per cent, marking one year since the central bank last lifted rates.

While inflation is falling, the central bank says it remains too high and rates need to remain “sufficiently restrictive”.

The Reserve Bank does not expect so-called core or “underlying” inflation to reach 3 per cent until the June quarter next year.

It sees inflation falling slightly faster than previously forecast and RBA governor Michele Bullock said it doesn’t need to be in the 2-3 per cent target band for the central bank to start cutting rates.

Speaking during Question Time, Treasurer Jim Chalmers said the RBA’s revised inflation forecasts showed the Australian economy was on track to achieve a “soft landing”.

The RBA will hold its final meeting of the year in December, but economists expect rate cuts will not occur until the first half of 2025.

Watch this story by business reporter David Chau.

There’s also a great analysis by business editor Michael Janda on why households shouldn’t bet on a February rate cut.

Good morning and welcome to Wednesday’s markets live blog, where we’ll bring you the latest price action and news on the ASX and beyond.

A rally on Wall Street overnight sets the tone for local market action today.

The Dow Jones index rose 0.8 per cent, the S&P 500 advanced 1.1 per cent and the Nasdaq Composite was up 1.3 per cent.

ASX futures were up 49 points or 0.6 per cent to 8,196 at 7am AEDT.

At the same time, the Australian dollar was up 0.8 per cent to 66.36 US cents.

Brent crude oil was down 0.8 per cent, trading at $US75.65 a barrel.

Spot gold gained 0.2 per cent to $US2,741.28.

Iron ore was up 2 per cent to $US105.95 a tonne.