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US stocks rose ahead of midterm elections and inflation data this week


US stocks rallied higher on Monday, preserving their upside traction for the second day and extending their previous rally ahead of midterm elections and inflation data later this week. The renewed speculation that the US Federal Reserve will ease the pace of quantitative tightening regardless of Chair Jerome Powell´s hawkish comments and easing restrictive measures in China has underpinned the market sentiment. Therefore, the risk-on mood acted as a tailwind for the equity markets on the first day of the week.

Markets focus now shifts to the release of the US Consumer Price Index (CPI) report for October, which will be closely watched after the core consumer price index rose more than forecast to a 40-year high in September. In the Eurozone, the upbeat EU data and hawkish comments from the European Central Bank (ECB) officials have provided support to the shared currency, as they said that the central bank shouldn’t stop rate hikes as long as underlying inflation has not peaked.

The benchmarks, S&P 500 and Dow Jones Industrial Average both climbed higher on Monday as the S&P 500 gained for a second day ahead of US midterms and closed near session highs with the US dollar falling with Treasuries. The S&P 500 was up 1.0% daily and the Dow Jones Industrial Average also advanced higher with a 1.3% gain for the day. Eight out of eleven sectors in the S&P 500 stayed in positive territory as the Communication Services and Energy sectors are the best performing among all groups, rising 1.82% and 1.73%, respectively. The Nasdaq 100 meanwhile climbed higher with a 1.1% gain on Monday and the MSCI World index was up 1.1% for the day.

Main Pairs Movement

The US dollar declined lower on Monday, extending its previous slide and refreshed daily lows below the 110.10 mark during the US trading session as Wall Street picked up momentum ahead of the close. Market participants believe that a slowdown in the pace of rate hikes by the Federal Reserve (Fed) is certain, making the American currency end up losing further ground against its major rivals. The upbeat market mood spurred by a seasonal US mid-term elections rally has also undermined the greenback.

GBP/USD outperformed on Monday with a 1.19% gain after the cable touched a daily high near the 1.1540 mark amid renewed US dollar weakness. On the UK front, uncertainty in the US political scenario ahead of US midterm elections and the US Consumer Price Index (CPI) report looming both helped the British pound to find demand. Meanwhile, EUR/USD preserved its upside momentum and climbed above the 1.0000 mark ahead of Eurozone Retail Sales and US inflation data. The pair was up almost 0.60% for the day.

Gold declined with a 0.37% loss for the day after failing to edge higher and retreated to the $1,675 mark during the late US trading session, as the positive market mood is weighing on the safe-haven metal despite the US dollar’s weakness. Meanwhile, WTI Oil dropped with a 0.89% loss for the day as China stays committed to zero covid policy. Crude oil prices have retreated to the $91.00 area.