Dollar shakes off Clinton FBI scare,
global stocks stay spooked
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[October 31, 2016]
By Marc Jones
LONDON (Reuters) - The dollar steadied but
stock markets stayed spooked on Monday after news the FBI was
investigating fresh e-mails linked to U.S presidential candidate Hillary
Clinton's private computer server.
The weakest German retail sales in two years, a fall in oil prices and
one of the toughest month in years for bond markets all made for a shaky
start in Europe where the STOXX 600 index dropped 0.4 percent. [.EU]
A lackluster day in Asia meant MSCI's 47-country 'All World' was flat
and, at 1.7 percent lower, on course for its first monthly fall since
June and its worst since a global shake down in January.
The dollar saw a recovery however, rising against the yen, euro and
sterling on the day and heading for its best month - up 3.2 percent -
against the world's top currencies in just under a year. [/FRX]
"The Clinton story of course has had an impact," said Richard Benson,
co-head of portfolio management at currency fund Millennium Global in
London.
"The polls are now roughly 50-50, but the probabilities are still hugely
in favor of Clinton, given how the votes are spread out (per state). The
question is whether people decide to reduce risk ahead of the election."
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U.S. Federal investigators have secured a warrant to examine newly
discovered emails, a source told Reuters on Sunday.
Clinton had opened a recent lead over her unpredictable Republican rival
Donald Trump in national polls, but it had been narrowing even before
the email controversy resurfaced. An ABC News/Washington Post poll
released on Sunday showed Clinton with a statistically insignificant
1-point national lead.
The Mexican peso, which has become a market proxy for the Clinton/Trump
race, also rebounded in European trading after being knocked back on
Friday.
South Africa's rand rallied too on hopes fraud charges would be dropped
against its finance minister, though emerging market stocks were down on
the day and facing the prospect of an end to their four-month winning
streak. [EMRG/FRX]
YIELDS BOIL, OIL TOILS
The jittery mood nudged investors back towards safe-haven government
bonds but it has been the opposite story for most of the month.
German government bond yields were on track to end October with their
biggest monthly rise since 2013, with sentiment fragile ahead of central
bank meetings this week and a first estimate of euro zone inflation due
shortly.
U.S. Treasury yields, which hit five-month highs last week, were poised
for the biggest monthly rise since February 2015, while for Britain's
gilts yields have risen almost 50 basis points, the biggest jump since
Jan. 2009.
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People are reflected in a display showing market indices outside a
brokerage in Tokyo, Japan, February 10, 2016. REUTERS/Thomas
Peter/File Photo
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"Recent sharp falls in sterling’s value vis-à-vis the euro and the
U.S. dollar could reduce confidence in sterling and eventually
threaten its role as a global reserve currency," said Standard and
Poor's, which reviewed the UK's credit rating on Friday.
"We could lower the rating if we conclude that sterling will lose
its status as a reserve currency."
Oil prices extended their slide - driven by renewed oversupply
concerns - and have surrendered most of the gains made in the first
half of October. They are set to end the month with meager gains.
The latest oil woes came after non-OPEC producers failed to make any
specific commitment to join the Organization of Petroleum Exporting
Countries in limiting output to support prices on Saturday.
U.S. crude slid 0.4 percent to $48.52 a barrel on Monday, but looked
set to edge up 0.6 percent for the month, while global benchmark
Brent also retreated 0.4 percent to $49.50, up 0.9 percent in
October.
"There was a lot of talk and nobody managed to agree on anything.
That has been pushing the market down," said Jeffrey Halley, senior
market analyst at OANDA brokerage in Singapore.
Adding to the list of potential market-moving events this week is a
raft of factory activity surveys on Tuesday for many economies.
There are also central bank policy meetings including Japan and
Australia on Tuesday, the U.S. Federal Reserve on Wednesday and the
Bank of England on Thursday, as well as U.S. October non-farm
payrolls on Friday.
(Reporting by Nichola Saminather; Additional reporting by Aaron
Sheldrick; Editing by Tom Heneghan)
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