Markets globally, most of which are headed for their first monthly retreats since March's meltdown, either deepened losses or pulled back from highs

 

World stocks fell and safer assets, such as the yen and dollar, found buyers on Wednesday after a chaotic first U.S. presidential debate and rising COVID-19 cases turned investors cautious, though strong factory surveys boosted China’s markets.

President Donald Trump and Democratic rival Joe Biden battled fiercely over Trump’s record on the coronavirus pandemic, healthcare and the economy in a bad-tempered first debate marked by personal insults and Trump’s repeated interruptions.

“What we’ve seen from the debate is the reinforcement that if Biden wins, Trump is not going to accept that,” Chris Weston, head of research at Pepperstone Group Ltd. in Melbourne told Bloomberg. “People positioned for an ugly contest afterwards have been validated.”

U.S. stock futures had nudged higher during the debate but then retreated as Trump cast doubt on whether he would accept the election’s outcome if he lost.

Asian trading had been choppy rather than outright weak but Europe sank 0.5 per cent early on amid worries too over the steep rises in coronavirus infections across the region again.

“The debate just added to the confusion about how the election will run,” said SEB investment management’s global head of asset allocation Hans Peterson. “But financially it doesn’t change anything.”

The U.S. dollar crept higher and is set for its best monthly gain since July 2019, while the yen rose 0.2 per cent to 105.50 per dollar, its strongest daily rise in nearly two weeks.

“The share market normally prefers the incumbent (president) to win,” said Shane Oliver, head of investment strategy at AMP Capital in Sydney. “U.S. futures initially rose, as perhaps Trump delivered some punches, but it wasn’t enough,” he said.

Markets globally, most of which are headed for their first monthly retreats since March’s meltdown, either deepened losses or pulled back from highs scaled after data showed China’s economic recovery remains on track.

MSCI’s broadest index of world shares which tracks nearly 50 countries dropped 0.2 per cent for a 4 per cent September loss. Oil is down just over 10 per cent this month while gold’s 4.1 per cent drop will make it its worst month since late 2016.

Asia had held its ground overnight, led by a 0.8 per cent gain in Hong Kong, though Japan’s Nikkei fell 1.5 per cent and Australia’s S&P/ASX 200 lost over 2 per cent.

Chinese property developers gained, led by a 15 per cent jump in Evergrande shares after the heavily-indebted giant reached a deal to ease cash crunch concerns.

China’s factory activity expansion accelerated in September, helped by rising export orders.

But as the election draws closer, investors are increasingly expecting a bumpy final lap and are bracing for the possibility that the result is unclear on polling day.

Options trade points to a volatile November. Two-month dollar/yen volatility, a gauge of expected moves in the yen, is elevated, and its premium over one-month volatility is near record levels.

On Wednesday, major currencies eased against the dollar after the debate, The euro dipped from a one-week high to $1.1736 and the risk-sensitive Australian dollar fell 0.2 per cent to $0.7118, heading for its worst month since March.

Biden said in the closing stages of the debate he would accept defeat if he lost at the ballot box and would not claim victory prematurely.

Trump, who has refused to commit to a peaceful transfer of power if he loses the election, repeated unfounded allegations that mail-in voting would lead to fraud.

“I don’t think we were expecting anything else from Trump,” said Chris Weston, head of research at Melbourne brokerage Pepperstone. “He continues to put that contested (result) risk premium back into the market.”

Elsewhere, oil prices fell amid rising concerns about fuel demand as the coronavirus pandemic worsens.