Yen surges as US election debate stirs market jitters

The yen surged to its strongest level in eight months following the US presidential debate, where Kamala Harris gained momentum, backed by Taylor Swift's endorsement. PredictIt showed Harris’ odds of winning the election rose to 56%, while Trump's chances fell to 48%. European markets are set for a weaker open as traders look to upcoming US inflation data and the Federal Reserve's rate decision.

Equities

The FTSE 100 dropped 0.8% on Tuesday, led by losses in healthcare and energy shares. AstraZeneca fell 2.4% following disappointing results from its lung cancer drug trial, which showed the treatment failed to significantly improve patient outcomes. Energy stocks were also under pressure, with the sector down 1.7% as Brent crude prices dipped below $70 per barrel for the first time since 2021 after OPEC+ revised down its demand forecasts for the next two years. In contrast, gold miner Centamin soared 22.9% after it received a $2.5 billion buyout offer from AngloGold Ashanti, leading a 6.7% rise in precious metal miners. Semiconductor wafer maker IQE plunged 19.2% after warning that its annual performance would be at the lower end of expectations.

On Wall Street, the S&P 500 edged up 0.5% despite concerns about economic growth weighing on sentiment. Oracle was the biggest gainer, jumping 11.4% after it reported stronger-than-expected quarterly earnings. However, banks dragged down the financial sector, with JPMorgan Chase falling 5.2% and Goldman Sachs down 4.3%, following warnings about weaker-than-expected trading revenue and income from interest payments. Smaller lender Ally Financial saw its shares tumble 17.6% after its CFO warned of increasing credit challenges.

Energy shares in the US also struggled, with the sector down 1.9%, mirroring a global decline in crude oil prices. The Dow Jones Industrial Average fell 0.23%, while the Nasdaq Composite rose 0.84%, driven by gains in technology stocks. Hewlett Packard Enterprise was among the day’s worst performers, falling 8.5% after announcing a $1.35 billion convertible stock offering to fund its acquisition of Juniper Networks.

Forex & Commodities

The US dollar fell over 1% against the yen, reaching 140.71 yen, its weakest level since December. This drop followed Kamala Harris' strong performance in a US election debate, which put Donald Trump on the defensive. Adding to the yen’s strength were comments from Bank of Japan board member Junko Nakagawa, who signalled that interest rates could rise if economic conditions continue to align with the central bank's forecasts.

Meanwhile, the dollar index, which tracks the dollar against six major peers, slipped 0.33% to 101.31. Sterling rebounded slightly, rising 0.19% to $1.3105, recovering from a recent low of $1.3049.

In commodities, gold prices held firm above $2,500 per ounce, with spot gold at $2,512.38, as traders awaited key US inflation data for further clues on the Federal Reserve’s next move. The prospect of lower US interest rates continues to support gold, which is up 21% this year. Oil prices also saw a recovery, with Brent crude rising 0.5% to $69.53 per barrel, driven by concerns over Hurricane Francine's impact on US production in the Gulf of Mexico, where 24% of crude production has been shut down.