Key week for markets as US election dominates

• UK stocks outperform as oil prices head higher.

• Key week for markets as US election dominates.

• Polls signal tight race, which could provide for another volatile period.

A mixed start in Europe has seen UK stocks lead the way, with both the FTSE 100 and 250 both on the rise. One particular area of strength for the FTSE has been the energy sector, with both BP and Shell on the rise thanks to a surge in WTI that has hit a fresh one-week high on Iran concerns and a delay to OPEC production hikes. The Iranian pledge to hit hard after the recent Israel retaliation heightens concerns that we may yet see the conflict escalate despite hopes that we will see a line drawn under the matter. Meanwhile, the OPEC+ decision to hold off for another month on their plans to raise production helped shift the supply/demand dynamic for the time being, helping to lift prices in early trade.

Traders are gearing up for perhaps the most important week of the year, with the expected BoE and Fed rate cuts largely playing a bit part role as we await the results of the US election. A shift in the polls seen over the weekend signal the potential for a Harris victory in Iowa; with a surge in the older female demographic signalling a shift that many believe could carry Harris to victory. Coming at a time when markets appeared to have taken a Trump victory as a given, the polls are a timely reminder that betting markets may not be the best indication of who will become the President of the United States.

All eyes turn towards the US open, with equities expected to move higher despite claims that recent strength was simply part of the ‘Trump trade’. The election looks significantly more of a contest than many had been expecting, which could provide a more protracted and volatile period ahead as we see potential recounts and challenges to potentially drag out this process.