Oil Prices Surge 3% Amid Election Day Market Calm

Oil prices rose nearly 3% on Monday after OPEC+ announced another delay in its planned output hike. As US Election Day unfolds, investors are bracing for close results in battleground states, with the dollar expected to climb if Trump wins. Meanwhile, the yuan’s implied volatility has reached record highs, reflecting concerns over potential trade protectionism.

Equities

The FTSE 100 rose 0.1% to 8,184.24 points on Monday, bolstered by gains in energy shares, as oil prices surged over 2% following OPEC+’s decision to delay an output increase. Leading the day's sectoral gains was the personal goods sector, as Burberry jumped 4.8% on reports of a potential bid from Italy's Moncler. The banking sector also performed strongly, with Natwest Group climbing 2.6% to reach a 13-year high. However, the mid-cap FTSE 250 dipped 0.1%, reflecting some caution ahead of the US presidential election and the Bank of England's rate-setting meeting on Thursday, where a 25 basis point rate cut is widely anticipated.

In the US, markets displayed volatility, with the Dow Jones Industrial Average down 0.61% to 41,794.60 points, the S&P 500 falling 0.28% to 5,712.69, and the Nasdaq Composite slipping 0.33% to 18,179.98. This came as investors grappled with election uncertainty and anticipated the Federal Reserve's policy statement later in the week. Nvidia, recently added to the Dow, edged up 0.48%, while Intel, which it replaced, saw its stock fall 2.93%, dragging on the Dow. Energy stocks were among the strongest US performers, with the sector up 1.87% in line with rising oil prices. In contrast, Marriott International fell 1.59% after revising down its 2024 profit forecast, citing weaker-than-expected domestic travel demand in the US and China.

Elsewhere, Constellation Energy was the S&P 500's biggest laggard, dropping 12.46% after the Federal Energy Regulatory Commission rejected an agreement to increase power capacity for an Amazon data centre. The decision weighed on the utilities sector, which ended down 1.21%. The Russell 2000 outperformed major indices, rising 0.4%, as small-cap stocks benefited from a decline in bond yields, with the benchmark 10-year Treasury note yield falling 6.4 basis points to 4.299%. Meanwhile, the CBOE Volatility Index ticked up to 21.94, reflecting the elevated uncertainty ahead of Election Day.

Forex & Commodities

The US dollar was steady but cautious ahead of Election Day, trading at 152.46 yen and $1.0879 per euro. Uncertainty around the election outcome has pushed USD/CNH implied volatility to near-record highs, with analysts anticipating a rise in the dollar if Trump wins, and a modest drop if Harris secures victory. Meanwhile, the Australian dollar held steady at $0.6601 after the Reserve Bank of Australia kept interest rates unchanged.

Gold edged up to $2,737.35 per ounce as political tensions boosted its appeal as a hedge against uncertainty. Gold’s recent peak of $2,790.15 last Thursday set a record, and analysts predict a Trump win could further support gold prices amid concerns over inflation linked to potential tariffs. Silver traded at $32.47 an ounce, recovering slightly from its recent two-week low.

Oil prices remained in a narrow range on Tuesday, with Brent crude at $75.05 and West Texas Intermediate at $71.43, following a 3% rise in the previous session as OPEC+ announced it would delay a planned production increase. Market strategists observed limited movement in oil prices as investors awaited clarity on US election results and possible new fiscal policies from China's National People’s Congress meeting, expected to provide guidance on spending and demand outlook.