US futures and European stocks slip after presidential debate

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Wall Street stock futures and European shares dipped following a chaotic US presidential debate, while further signs of China’s economic recovery failed to lift market sentiment.

Futures for America’s S&P 500 erased initial gains to turn 0.9 per cent lower as investors responded to a 90-minute debate between US president Donald Trump and Democratic challenger Joe Biden, which at times descended into a verbal brawl. The European Stock 600 shares index fell 0.3 per cent and London’s FTSE 100 lost 0.2 per cent.

When asked repeatedly whether he would commit to respecting the results of November’s election, Mr Trump instead reiterated his assertions of widespread voter fraud.

“His suggestion that he would actively contest the results for weeks after the ballots are counted increases the level of uncertainty for market participants and will likely lead to higher volatility as we approach election day,” said Mark Haefele, chief investment officer for global wealth management at UBS.

Fears of a disputed election have driven up futures tied to the Vix, an index of market volatility known as the “fear gauge”, indicating investor concern. US stock futures are thinly traded during Asian hours, which can exacerbate volatility.

“Markets are already fretting over a contested election,” said Kristina Hooper, chief global market strategist at Invesco. “I would expect stock market volatility and short-term stock market sell-offs in the weeks leading up to the election.”

China’s CSI 300 index of Shanghai and Shenzhen-listed stocks gave up early gains to fall 0.1 per cent, while Hong Kong’s Hang Seng rose 0.8 per cent after the index gave back some of its earlier strength.

Chinese stocks initially climbed after data showed that manufacturing activity in September was better than economists’ expectations. New export orders rose for the first time since the Covid-19 pandemic began.

“The upbeat . . . readings suggest that [the] recovery is gaining steam and will likely extend into” the fourth quarter, said Xiangrong Yu, senior China economist at Citigroup.

But some analysts highlighted pitfalls for Chinese markets surrounding the US election.

“China’s outlook still looks challenging particularly against the unfavourable geopolitical dynamics,” said Hao Zhou, an analyst at Commerzbank in Singapore. “The US election is around the corner, which posts an event risk for the market in the short term.” 

Japan’s Topix index fell 1.7 per cent and Australia’s S&P/ASX 200 dropped 1.9 per cent.

In currencies, China’s renminbi was on track to notch its best quarter since the global financial crisis in 2008, with the onshore exchange rate rising 0.1 per cent on Wednesday to Rmb6.8104 per dollar.

The index tracking the dollar against trading partners’ currencies hovered around a two-month high, reflecting how investors view the US currency as a shelter from economic shocks.

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