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US election impact on stocks

European Markets Mixed at Open

Stocks are mixed at the open on Monday even as China cut lending rates and German producer prices fell. The FTSE 100 rose a third of a percent to test the upper end of the recent range near 8,400, whilst the DAX dipped slightly to 19,633 and the CAC was steady at 7,612. Oil edged up from a three-week low, while gold hit a fresh record high. Bitcoin eased back a touch after hitting its highest since July. Moldova narrowly backed staying with the EU project – but a narrow vote is hardly a ringing endorsement.

US Markets: Strong Performances and Election Uncertainty

The Dow and the S&P 500 rose to fresh record highs on Friday and set the seal on six straight weeks of gains. Earnings season is providing sufficient juice for the bulls even if volatility is expected in the run-up to the election. Companies are generally beating a low bar. Traders seem to think Trump 2.0 would be good for stocks. BofA: "All else equal, we estimate that Harris’ proposal to raise the corporate tax rate from 21% to 28% would be a 5% hit to EPS, while Trump’s proposal to lower the corporate tax rate from 21% to 15% would boost EPS by 4%."

We’re on the final stages of the US presidential election campaign trail; polls indicate it’s way too close to call. Markets seem to have leant towards a Trump victory. Pershing Square’s Bill Ackman explains why only a vote for Trump will do. DJT is up 143% in the last month. Polymarket has Trump at 61% vs Harris at 39%. Stan Druckenmiller says the market appears “very convinced Trump is going to win”.

Key Meetings and Global Summits This Week

Meanwhile, it’s a week full of meetings. Commonwealth leaders convene in Samoa, the IMF and World Bank host their annual meetings in Washington – the UK should get its fiscal report card on Wednesday, exactly one week before the Budget. Whilst the IMF and World Bank are in Washington, the emergence of a new multi-polar world is underscored by the presence of the BRICS summit in Russia. Also this week, the Bank of Canada is expected to cut, with markets looking at a strong chance it could go with a jumbo 50bps after inflation fell to 1.6%.

Earnings Season: Spotlight on Tesla, Amazon, and Boeing

Earnings season continues apace, with more than 100 S&P 500 companies reporting. Tesla, Amazon and Boeing are among the highlights. Tesla continues to be the focus for retail investors. Quarterly deliveries rose 6.4% in the quarter from a year before but missed expectations for stronger growth. The key focus will be on margins, which have been pressured, and on the outlook for a reboot in China demand. But after the disappointment of the ‘We, Robot’ event, investors will hope for better news on core EV sales. “We were overall disappointed with the substance and detail of the [robotaxi] presentation. As such, we anticipate TSLA to be under pressure following the event,” said Morgan Stanley analyst Adam Jonas. Last quarter, the company reported a 7% drop in auto revenue as earnings fell short of estimates. For this quarter, investors are expecting a 10% decline in earnings. Barclays analyst Dan Levy notes that “there are outstanding questions on the volume outlook and path to margin recovery, and we also question the path to unlocking value from Tesla’s emphasis on AV/AI-driven growth.” Amazon, meanwhile, is expected to report a profit of $1.14 per share, up 34.1% from $0.85 per share in the year-ago quarter. JPMorgan named AMZN, along with Meta and Uber, among its top three picks going into earnings.


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