The Bank of Canada cut the rate by 0.5%. Stock indices under selling pressure ahead of US elections

At Wednesday’s close, the Dow Jones (US30) Index was down 0.96%, the S&P 500 Index (US500) decreased by 0.92%, and the NASDAQ Technology Index (US100) closed yesterday negative 1.55%. All three major US equity indices closed sharply lower on Wednesday amid rising Treasury yields and concerns over the upcoming US elections. Investors and hedge funds are locking in their profits to reduce uncertainty risks.

Stocks also declined amid negative corporate news: McDonald’s (MCD) shares fell by 5% after an E. coli outbreak was linked to Quarter Pounder sandwiches that sickened dozens of people in several states. Additionally, Boeing (BA) shares are down 1.7% after the company reported larger-than-expected negative adjusted free cash flow for the third quarter. Coca-Cola’s (KO) share price is down 2.00% after reporting an unexpected 1% decline in third-quarter sales.

The Canadian dollar fell to 1.38 per dollar, its lowest since August, after the Bank of Canada (BoC) cut rates by 50 bps and signaled that it will likely continue to lower its benchmark rate. It was the first significant rate cut in the current easing cycle after three consecutive 25 bps cuts. The MPC noted that recent data showed slowing inflation and a weakening labor market.  CAD was also pressured by lower oil prices, which limited the Canadian economy’s export turnover.

Equity markets in Europe were declining on Wednesday. Germany’s DAX (DE40) fell by 0.23%, France’s CAC 40 (FR40) closed down 0.50%, Spain’s IBEX 35 (ES35) gained 0.27%, and the UK’s FTSE 100 (UK100) closed down 0.58% yesterday. 

WTI crude oil prices fell below $71 per barrel on Wednesday, ending a two-day rally, after the latest EIA data showed that US oil inventories remain high. The EIA reported a 5.5 million barrel increase in crude inventories, which was well above forecasts

Asian markets were mostly rising on Wednesday. Japan’s Nikkei 225 (JP225) fell by 0.80%, China’s FTSE China A50 (CHA50) gained 0.37%, Hong Kong’s Hang Seng (HK50) rose by 1.27%, and Australia’s ASX 200 (AU200) was positive 0.13% over yesterday. Chinese markets are rising for a fourth day, buoyed by bets on creating a 2 trillion yuan market stabilization fund, as suggested by a government-affiliated think tank. In addition, China’s central bank plans to expand the size of its new swap fund to support stock market liquidity after an initial quota of 500 billion yuan.

Judo Bank’s Australian Manufacturing PMI Index fell to 46.6 in October 2024 from 46.7 in September, This marks the ninth consecutive month of deterioration in the sector and the fastest pace since May 2020. The services PMI business activity index rose to 50.6 in October from 50.5 in September. This was the ninth consecutive month of growth. On the monetary policy front, Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser said earlier this week that the strong employment growth was a bit of a surprise, indicating that the central bank is prepared to react in either direction depending on incoming data. Markets expect the RBA to keep policy steady this year, with the first-rate cut not fully expected until May next year.

The New Zealand dollar traded near a two-month low as the US dollar strengthened amid growing expectations that the Federal Reserve will continue to moderate interest rate cuts in the coming months and improve the odds of Donald Trump winning the 2024 presidential election. Domestically, the Kiwi faced additional pressure as the Reserve Bank of New Zealand is expected to deliver another 50 bps rate cut at its final meeting in November, with markets pricing at some risk of a 75 bps rate hike.