LONDON/SINGAPORE: World stocks fell and safer assets, such as the yen and dollar, found buyers on Wednesday after a chaotic first US presidential debate and rising Covid-19 cases turned investors cautious, though strong factory surveys boosted China’s markets.
President Donald Trump and Democratic rival Joe Biden battled fiercely over Trump’s record on the coronavirus pandemic, healthcare and the economy in a bad-tempered first debate marked by personal insults and Trump’s repeated interruptions.
US stock futures had nudged higher during the debate but then retreated as Trump cast doubt on whether he would accept the election’s outcome if he lost.
Asian trading had been choppy rather than outright weak but Europe sank 0.5pc early on amid worries too over the steep rises in coronavirus infections across the region again.
“The debate just added to the confusion about how the election will run,” said SEB investment management’s global head of asset allocation Hans Peterson. “But financially it doesn’t change anything”.
S&P 500 futures were last 0.6pc lower, with Dow Jones and Nasdaq 100 futures down by as much as 1pc.
The U.S. dollar crept higher and is set for its best monthly gain since July 2019, while the yen rose 0.2pc to 105.50 per dollar, its strongest daily rise in nearly two weeks.
“The share market normally prefers the incumbent (president) to win,” said Shane Oliver, head of the investment strategy at AMP Capital in Sydney. “U.S. futures initially rose, as perhaps Trump delivered some punches, but it wasn’t enough,” he said.
Markets globally, most of which are headed for their first monthly retreats since March’s meltdown, either deepened losses or pulled back from highs scaled after data showed China’s economic recovery remains on track.
MSCI’s broadest index of world shares which tracks nearly 50 countries dropped 0.2pc for a 4pc September loss. Oil is down just over 10pc this month while gold’s 4.1pc drop will make it its worst month since late 2016.
Asia had held its ground overnight, led by a 0.8pc gain in Hong Kong, though Japan’s Nikkei fell 1.5pc and Australia’s S&P/ASX 200 lost over 2pc.
Chinese property developers gained, led by a 15pc jump in Evergrande shares after the heavily-indebted giant reached a deal to ease cash crunch concerns.
China’s factory activity expansion accelerated in September, helped by rising export orders.
The official manufacturing Purchasing Manager’s Index (PMI) rose to 51.5 in September from 51.0 in August. Analysts had expected it to pick up slightly to 51.2.
The presidential debate yielded no clear winner and barely moved the needle in betting markets, which project a narrow Biden victory. Odds maker Smarkets slightly lowered Trump’s chance of re-election to 40pc after the debate from 42pc beforehand.
But as the election draws closer, investors are increasingly expecting a bumpy final lap and are bracing for the possibility that the result is unclear on polling day.
Options trade points to a volatile November. Two-month dollar/yen volatility, a gauge of expected moves in the yen, is elevated, and its premium over one-month volatility is near record levels.
On Wednesday, major currencies eased against the dollar after the debate, The euro dipped from a one-week high to $1.1736 and the risk-sensitive Australian dollar fell 0.2pc to $0.7118, heading for its worst month since March.
Biden said in the closing stages of the debate he would accept defeat if he lost at the ballot box and would not claim victory prematurely.
Trump, who has refused to commit to a peaceful transfer of power if he loses the election, repeated unfounded allegations that mail-in voting would lead to fraud.
“I don’t think we were expecting anything else from Trump,” said Chris Weston, head of research at Melbourne brokerage Pepperstone. “He continues to put that contested (result) risk premium back into the market.”
Elsewhere, oil prices fell amid rising concerns about fuel demand as the coronavirus pandemic worsens.
Brent crude futures were last down 0.9% at $40.66 a barrel and U.S. crude futures were down 0.7% at $39.00 a barrel. Gold slipped 0.4% to 1,890 an ounce.