Shares, dollar tread water
as U.S. election campaign enters final week
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[November 01, 2016]
By Vikram Subhedar
LONDON
(Reuters) - European shares were poised to fall for a seventh straight
session while the dollar edged lower with investors largely holding back
as the contentious U.S. presidential campaign entered its final week.
Earlier in the day, stronger-than-expected manufacturing data from China
underpinned gains in Asian stocks and further stoked inflation
expectations that drove a selloff in bonds in recent weeks.
Forecast-beating results from oil major Royal Dutch Shell initially
provided a boost to Europe's STOXX 600 index but those gains proved
short-lived with weakness in banks dragging the index 0.1 percent lower.
Trading volumes were light across major European exchanges.
The dollar was slightly weaker against a basket of currencies with the
dollar index down 0.2 percent.
In a busy week for central banks, the Bank of Japan and Reserve Bank of
Australia held their policies steady as expected.
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The BoJ also held off on expanding stimulus on Tuesday but once again
pushed back the timing for hitting its inflation target. The dollar
hovered around 104.80 yen.
"We're in limbo, unfortunately, ahead of the U.S. election," said Bart
Wakabayashi, head of Hong Kong FX sales at State Street Global Markets.
Hillary Clinton held a five-percentage-point lead over Republican rival
Donald Trump, according to a Reuters/Ipsos opinion poll released on
Monday, down only slightly since the FBI said last week it was reviewing
new emails in its investigation of Clinton ahead of the Nov. 8 election.
Markets see only a small chance that the U.S. Federal Reserve will raise
rates when it concludes its meeting on Wednesday, but traders will be
scouring its statement for clues on the timing of its next rate hike.
Chances of a rate hike in December were at around 78 percent, according
to the CME Group's FedWatch Tool.
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![](../images/110116pics/busine53.jpg)
People walk past a panel displaying the falling Hang Seng Index in
response to British exit from the European Union, in Hong Kong,
China June 24, 2016. REUTERS/Bobby Yip
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Meanwhile, Italy's borrowing costs hit fresh two-year highs on Tuesday
with investors wary of political risks and banking sector reforms
continuing to run into hurdles.
Other euro zone bond yields also rose between 3-4 basis points on the
day, with Ireland's 10-year bond yields hitting its highest level since
June, rising 4 bps to 0.69 percent.
The ramp-up in yields has been a central theme across markets over the
past month, spurring turbulence in debt markets and sending global
investors out of bonds and into cash on fears that a multi-decade bond
bull run was coming to an end.
In commodity markets, oil prices rose from one-month lows after OPEC
agreed on a long-term strategy that was seen as an indication the cartel
was reaching a consensus on managing production.
U.S. West Texas Intermediate (WTI) futures <CLc1> were up 0.1 percent at
$46.92.
(Reporting by Vikram Subhedar; Editing by Raissa Kasolowsky)
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