CNN Business/Julia Horowitz
The presidential debate confirmed Wall Street’s worst fears
Wall Street is increasingly concerned that uncertainty surrounding the outcome of the US election in November could roil markets. The debate between President Donald Trump and Joe Biden on Tuesday did little to assuage those fears.
What’s happening: Stocks are lower following an acrimonious and chaotic debate between the two candidates, during which Trump repeatedly interrupted his opponent and failed to engage on questions of policy.
Investors have been particularly worried by Trump’s refusal in recent days to commit to conceding the election if he loses. That could lead to a long period of uncertainty after voters cast their ballots.
On Tuesday, Trump repeated baseless claims about the proliferation of fraud tied to mail-in voting, and declared he wouldn’t support a result under certain circumstances.
“If I see tens of thousands of ballots being manipulated, I can’t go along with that,” Trump said.
It’s the kind of comment that’s causing traders to rush to hedge some bets in case markets go haywire around the election.
“Market participants are concerned that Trump will not leave peacefully if he loses the election, bringing political risks to the fore,” Axi market analyst Milan Cutkovic said.
Gold firms near $1,900 level on stimulus hopes, sombre dollar
Gold rose close to the $1,900 mark on Thursday, boosted by an easing dollar and increased investor confidence that there will be further U.S. fiscal stimulus measures to aid the virus-beaten economy.
Spot gold rose 0.6% to $1,896.78 per ounce by 1002 GMT, having ended September 4.3% lower, in its biggest monthly drop since November 2016.
U.S. gold futures were 0.3% higher at $1,901.70 per ounce.
On Wednesday, U.S. Treasury Secretary Steven Mnuchin said talks with House Speaker Nancy Pelosi “made a lot of progress” on the long-awaited COVID-19 relief legislation.
StoneX analyst Rhona O’Connell said uncertainty over the outcome of the U.S. Presidential election remained a supportive factor longer term, but negotiations over stimulus between Pelosi and Mnuchin were likely to influence trade more in the short term.
Regardless of the election outcome, “there will still likely be wrangling over fiscal stimulus to try and maintain financial stability … I think there will be decently sized stimulus anyway, but the political nuances will stay,” she said.
Gold is often viewed as a hedge against inflation and currency debasement.
Hopes for the passage of a long-awaited fiscal stimulus package in the U.S. and strong labour and manufacturing data gave a boost to risk sentiment and pushed the dollar to a one-week low.
A weaker dollar makes bullion cheaper for investors who hold other currencies.
Big U.S. banks to report profit plunge as pandemic recession takes hold
As big U.S. commercial banks close their books on the third quarter, analysts expect them to report a 30% to 60% plunge in profits on the year-ago period due to the pandemic-induced recession and near record low interest rates.
That slump in third quarter net income comes even though lenders are not going to make outsized provisions for expected loan losses as they did in the first and second quarters.
And, while capital markets and investment banking revenue is expected to be up from 5% to 20%, that won’t be enough to make up for the decline in interest income from loans and securities.
“You have soft loan growth and you’re still feeling the impact from aggressive Fed actions earlier this year,” said analyst Jason Goldberg of Barclays.
Citigroup Inc and Wells Fargo & Co, the third- and fourth-biggest U.S. banks by assets respectively, will report net income down by about 60%, according to I/B/E/S analyst survey data from Refinitiv.
JPMorgan Chase & Co and Bank of America Corp, which rank first and second in assets respectively, are expected to show profits down about 30%.
Investment banks Goldman Sachs Group Inc and Morgan Stanley, which are benefitting from being more concentrated in the busy capital markets, are expected to report more modest profit declines of about 5% to 10%.