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All eyes on US mid-term elections

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Asian markets were given a boost from the middle of last week on positive earnings reports from Wall Street and developments in US-China trade relations.

But as markets head into the first full week of this month, all eyes will be on political developments in the US, with the mid-term elections tomorrow.

Global head of currency strategy and market research at FXTM Jameel Ahmad said: "Any optimism that political risk will take a backseat from influencing financial market movements (this week) will likely be faint, when you consider that the largest political risk event of this year is now just days away.

"The US mid-term elections are arguably something that financial markets have overlooked when you consider the number of different external uncertainties that have caught the attention in recent weeks."

Polls suggest that the Democrats will win a majority in the House of Representatives but the Republicans will retain control of the Senate.

But, in the event of an upset, where Democrats take both chambers of Congress, the expectations will be for more legislative gridlock due to bipartisan politics at play.

On the US mid-terms, IG's Pan Jingyi said: "The intuitive response towards such an outcome, which interestingly had been shown to be a base case scenario in polls, will be a slump for the US dollar. The equity market, meanwhile, may not be significantly affected.

"In light of the uncertainty as to when the narrowed results could arrive, traders will likely be on standby from the close of polls, mid-day Wednesday here in Asia onwards."

Mr Ahmad said: "Emerging market currencies in particular will be seen as the most sensitive to such a political event. Their best chances of regaining strength against the greenback rest on increasing expectation that the Trump administration might lose some political influence in the mid-term elections."

In Singapore, the earnings season continues to take centre stage, with many Straits Times Index constituents releasing their earnings for the past quarter this week.

These include banking stalwart DBS' Q3 earnings today and Yangzijiang Shipbuilding's Q3 results on Wednesday.

Thursday will be an exceptionally busy day with Singtel, Genting Singapore and City Developments due to report earnings for the past quarter.

A slew of economic data releases for last month will be out this week as well in China.

This includes today's Caixin October Services purchasing managers' index, foreign reserves figures on Wednesday, trade data on Thursday, and consumer price index and producer price index figures on Friday.

Other than China, Malaysia (today), Taiwan (Wednesday), the Philippines (Thursday) will also report their latest trade numbers this week. Q3 gross domestic product (GDP) data for Indonesia and the Philippines are due today and Thursday respectively.

The Bloomberg consensus expects Indonesian GDP growth to slow slightly to 5.18 per cent year-on-year (y-o-y) while the Philippines' may accelerate to 6.3 per cent y-o-y.

Among central banks, the Reserve Bank of Australia, the Reserve Bank of New Zealand and Bank Negara Malaysia are due to make monetary policy decisions this week. None of them are expected to change their respective policy rates.

US-listed companies will continue to report earnings while October's ISM non-manufacturing PMI is out today and PPI on Friday. In Europe, the UK's Q3 GDP data will be released on Friday. Markets in Singapore and Malaysia will be closed tomorrow while Indian markets will take a break on Wednesday for the Deepavali holiday.