Markets are trying to shake it off after the US presidential debate

A look at the day ahead in European and global markets from Ankur Banerjee

Investors took a big hit in the US presidential debate between Donald Trump and Kamala Harris, where details were few but plentiful. However, the spotlight belonged to Taylor Swift, who immediately after the debate supported Harris.

Asian markets were broadly lower and U.S. stock futures slipped, with the dollar on the back foot as the two candidates clashed on issues including immigration, foreign policy and health care, but the debate was light with regarding specific policy details.

Online prediction market PredictIt’s 2024 presidential general election market showed Trump’s probability of victory dropping after the debate to 48 percent from 52 percent. Harris’ ratings improved to 56% from 53%.

All of which meant that investors will remain nervous until the November election as they try to gauge the economic policies from both candidates and determine who might still win.

The focus for markets now shifts to the US inflation reading later in the day, although the US central bank made it clear that employment took a bigger focus than inflation.

While the Federal Reserve is likely to cut rates next week, there is considerable uncertainty about the size of the cut. Markets are pricing in a one in three chance of a 50 basis point cut and anticipate 114 bps of easing this year.

Futures indicate European stocks are headed for a lower open as traders, without much economic data today, are likely to focus on Fed moves ahead of Thursday’s European Central Bank meeting, where it is expected to cut rates.

Meanwhile, the yen rose to an eight-month high after a boost from Bank of Japan board member Junko Nakagawa, who reiterated in a speech on Wednesday that the central bank would continue to raise rates if the economy and inflation move according to his predictions. .

Key developments that could influence markets on Wednesday:

Economic events: UK GDP estimate for July and UK industrial and manufacturing output for July; US Inflation Report

(By Ankur Banerjee; Editing by Muralikumar Anantharaman)