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Stocks Rally as Clinton Seen Winning Debate

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Financial markets judged the first of three American presidential debates a win for Hillary Clinton, as Mexico’s peso rallied from a record low and U.S. stock index futures rose with equities in Asia and Europe.

The peso, a proxy for Donald Trump’s election prospects, rebounded more than 2 percent and Canada’s dollar strengthened from its weakest level since March, a sign investors see a reduced chance the Republican candidate will win the November vote. An MSCI gauge of global shares rose, while haven assets fell out of favor with gold declining for the first time in seven days as the yen weakened and U.S. Treasuries fell. Nickel erased losses on concern supplies will be disrupted by mine closures in the Philippines, the top producer.

In a CNN/ORC poll of debate watchers, 62 percent said Clinton won the exchange. Wagers against the Mexican peso had surged to a record ahead of the televised matchup in New York after some opinion polls put the two candidates neck-and-neck. A Trump election victory may hurt bonds in emerging markets such as China and Mexico by weighing on global trade, according to Aberdeen Asset Management Asia Ltd., while Citigroup Inc. has said it could sink equities and spur volatility in gold and currency markets.

"The peso, Canadian dollar, S&P futures and Australian dollar are all surging — very much a relief rally in risk assets,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “In FX markets, the most obvious trade to anticipate a Trump presidency is to short the peso.”

The debate marked the first time that voters saw the major-party nominees on the same stage, a pivotal moment in a close and bitterly fought contest. The two candidates clashed over trade, the economy and race relations in an event that put on display their starkly different personalities and visions of the nation’s future.

Currencies

The Mexican peso jumped 2.2 percent, the most in five months, as of 8:20 a.m. London time. Net short positions on the currency jumped 37 percent in the week ending Sept. 20 to their highest level in data going back more than two decades as polls indicated support was growing for Trump, who has pledged to renegotiate the two-decade-old North American Free Trade Agreement and step up immigration controls. Canada’s dollar rose 0.4 percent.

“Hillary looks the stronger of the two,” said Simon Pianfetti, a senior manager at the market solutions department at SMBC Trust Bank Ltd. in Tokyo. “This is bullish risk, and yen negative.”

South Korea’s won strengthened with higher-yielding currencies including the Australian and New Zealand dollars, while the yen slid 0.4 percent. The Bloomberg Dollar Spot Index fell 0.2 percent, reversing an earlier advance.

Stocks

S&P 500 Index futures rallied 0.6 percent, after declining by as much as 0.3 percent. The U.S. benchmark has risen by an average of 0.85 percent on the day following the first debate in the run-up to a general election, according to data going back to 1992 compiled by Strategas Research Partners LLC. Opinion polls have swung by 3 percent on average, within most surveys’ margin of error, following the first debates of election campaigns since 1984, Stategas noted.

The MSCI Asia Pacific Index was up 0.5 percent, having recovered from a loss of as much as 0.9 percent. Technology shares drove gains, while bank stocks remained under pressure amid concern about the financial health of Deutsche Bank AG, Germany’s largest lender. The Stroxx Europe 600 Index rose 0.5 percent and Deutsche Bank advanced 1.6 percent, after ending the last session at an all-time low.

“Globally we’d started today on concerns over Deutsche Bank, and the yen weakened while stock markets tipped lower, said Chihiro Ohta, a Tokyo-based senior strategist with SMBC Nikko Securities Inc. "But with the view solidifying that secretary Clinton had taken the upper hand in the first presidential debate, the risk-avoiding moves in the yen receded."

Commodities

Crude oil slipped 0.7 percent to $45.62 a barrel in New York, after gaining 3.3 percent in the last session and tumbling 4 percent on Friday. Volatility has been picking up before major producers meet Wednesday to discuss output curbs in Algiers and Venezuela’s oil minister has warned prices could tumble below $20 if no deal is reached. Saudi Arabia has offered to cut production as part of a broader agreement, while signaling it doesn’t expect an accord this week.

Nickel was up 1.1 percent in London, after earlier sliding as much as 2.7 percent. The Philippines announced the outcome of an environmental audit on its mining operations that’s led to the closure or recommended suspension of nickel mines that together accounted for 56 percent of the nation’s production by value last year. Zinc and lead advanced 1 percent.

Bonds

The yield on U.S. Treasuries due in a decade increased by two basis points to 1.60 percent, after sliding four basis points on Monday. BlackRock Inc., the world’s biggest money manager, said investors should be wary of Treasuries as the Federal Reserve moves toward raising interest rates.

The Bank of England on Tuesday begins a 10 billion pound ($13 billion) corporate-bond purchase program. The initatitive is part of stimulus efforts to support the U.K. economy following the June vote to leave the European Union.

Rates on 10-year sovereign bonds in Japan declined by two basis points to this month’s low of minus 0.08 percent.

Yuan borrowing costs in Shanghai rose as China’s central bank used its money-market operations to pull funds from the financial system for the second day, furthering efforts to rein in leverage in the nation’s bond market. The one-month Shanghai Interbank Offered Rate climbed to 2.74 percent, the highest since Aug. 4.

Source: Bloomberg