Hillary's emails are not the only story, it just seems that way .....

October 31st 2016

Hillary's emails are not the only story, it just seems that way .....

ref:- "Five Things You Need to Know to Start Your Day", Bloomberg Markets

E-mail saga

Well, we've said a number of times that in this modern age it would be very unwise to rule anything out ..... politically speaking, that is. We certainly weren't writing off Donald Trump's electoral prospects, but it has to be said that just a week ago an ABC / Washington Post poll put Mrs Clinton 12 points ahead as the Donald stumbled from one faux pas to the next and his chances were looking decidedly slim. Not any longer .... after the FBI decided to resurrect its investigation into Mrs Clinton's e-mail practices.

Those same pollsters now put the gap at just 1 point, and it is a very real possibility once more that Donald Trump will be the next president. The Clinton camp are on the attack as to the timing of FBI Director James Comey's decision to reveal the re-opening of the investigation in the immediate run-up to the election ..... the suggestion being that it was politically motivated. We shouldn't forget that it was the same Mr Comey who had earlier dropped the probe into the Clinton e-mails, rebuking her but declining to press for  prosecution. It was a move that prompted a typically aggressive response from Mr Trump and his supporters. If the recent revelation was politically motivated it may well be that Mr Comey was not being "pro Trump" so much as trying to get accusations of being "pro-Clinton" off his back.

Whatever the case, from this distance it looks extremely ill-advised and it hard to see how such a public official getting involved in the outcome of an election (inevitably) does not cross some sort of line , whether it's a legal one or not. It's put the cat amongst the pigeons for sure, and though Citicorp Inc. say the odds of Clinton victory have fallen from 81% to 75%, it feels a lot closer than that.

There is a reticence amongst commentators to speculate on the market effects of a Trump win ..... not surprising when you consider that his policy statements (such as they are) have been vague, contradictory and seemingly made off the top of his head. Anyway three thoughts to mull over until we return to this :

Bonds : there may be a short-term boost to bonds a result of a "flight-to-safety",  even more so if the Fed decide to postpone a hike given the uncertainty a Trump win would create. That would be a nice irony  ---  Mr Trump has repeatedly criticised the Fed for it's easy monetary policy. Longer term, political pressure for higher rates and an expensive fiscal programme would not be helpful

Currencies : If the jury's out on the general prospects for the dollar in these circumstances, Trump's anti-globalisation, anti-trade deal message is not good news either for the US's trading partners in NAFTA and beyond, or for their currencies .... think Mexican Peso and Canadian Dollar. The Japanese Yen may attract some safe-haven buying.

Equities : The commitment to boost the military would clearly be a boost for defence stocks , but companies reliant on global trade may not fare so well

Carney conjecture

The speculation has been that Bank of England governor Mark Carney would stick by his original commitment and leave the post to return to his native Canada in 2018. It's thought that he may have decided that the criticism levelled in his direction  by arch-Brexiteers over his repeated warnings of the problems likely to be faced by Britain was getting under his skin. We wouldn't blame him ..... it seems to us that his statements have been an honest assessment of prospects rather than betraying any political bias and entirely in keeping with his job, whatever one or two senior Conservatives have to say about it.

PM Theresa May seems to have backed down from her own criticism of monetary policy in her Tory party speech. Whether it's connected or not, a report in this morning's Financial Times says that Mr Carney is willing to stay for his full term that ends in 2021. We may (or may not) hear more at the BoE press conference on Thursday after their policy decision. Talking of which, if a further rate cut was on the cards at one stage, it would be a big surprise now. Resilient growth numbers and inflationary concerns have most likely put paid any chance of a cut.

OPEC failure

We can't say it's a great surprise, but a meeting in Vienna called to thrash out the details of a production cut in November failed to do so  --  Iraq and Iran were the stumbling blocks, apparently. They'll try again of course, most crucially at the Nov 30th meeting itself but non-OPEC Russia and Oman took the opportunity to remind everyone that they would only participate once OPEC had secured an agreement. Unsurprisingly, oil marked lower again this morning.

Markets

Equity indices globally were led lower by energy stocks after the OPEC news, which also caused the Russian Rouble to sell off. The South African Rand strengthened after charges against Finance Minister Pravin Gordhan, generally trusted by markets in contrast to his political masters, were dropped. 10yr US Treasury yields made a 5-month high of 1.88% amid continuing global weakness in bonds, but returned to near unchanged at 1.84%, possibly on the Trump factor (see above).

Spain stability 

PM Mariano Rajoy won a second confidence vote in parliament  and the way is now clear for him to form a government. Mr Rajoy's centre-right policies are generally considered market-friendly but his will be a minority government that faces the unenviable task of dealing with a large budget deficit at the same time as high unemployment, particularly amongst the young. The decision of the Socialists to abstain from voting against Mr Rajoy allowed this vote to go through after a long period of deadlock, but if it sends a high percentage of their disenchanted supporters over to the hard-left Podemos party, Mr Rajoy is assured of a difficult time ahead.