Four hours before an estimate 100 million Americans tune in to watch the two wannabe leaders of the free world go head to head, and a Bloomberg poll published around 7pm Australian Eastern Time last night shows Clinton and Trump tied on 46%. The same poll also puts Trump ahead of Clinton once third party candidates are included. The news has made a mark, with US stocks closing 0.86% lower and the VIX ‘fear gauge ‘up over two points or some 18%. U.S. bond yields are lower again, at 10 years by 3.4bps to 1.584%.

Weaker stocks aren’t all about the U.S. with European indices pressured lower by fresh record lows for Deutsche Bank as markets continue to fret over the need for Europe’s biggest bank to have to raise fresh capital. The Eurostoxx 50 closed 1.9% low with the German Dax down 2.2%.

It’s no surprise to see the Mexican peso – the favourite ‘whipping boy’ of currency market traders whenever expectations Trump can win the election rise – continue on its downward trajectory.  USD/MXN has just made a new record high at 19.9230 and so is within kissing distance of moving onto a 20 handle.

The strongest currency in the word overnight, and by some margin, is the Japanese Yen, USD/JPY down by 0.7% relative to Friday night’s New York close, to ¥100.30. This is partly on the yen’s pre-eminent safe-haven characteristics, though USD/JPY was already under pressure after BoJ Governor Kuroda spoke in Osaka yesterday afternoon. While underscoring his determination to use all possible policy means to achieve its inflation goals, he did nothing to assuage deepening market conviction that the policy instruments and settings announced last week won’t do it. We also had former MoF currency Czar Eisuke Sakakibara on TV yesterday afternoon saying he thought USD/JPY at ¥95-100 would be alright for the Japanese economy and that he expected it to gradually appreciate to around ¥90 next year.

Despite the ‘risk-off’ tone to markets, both the AUD and NZD are stronger, AUD by 0.17% to 0.7636 as we write and NZD by 0.46% to 0.7274. The CAD is weaker again though, extending Friday’s 1% loss and despite oil prices recouping more than half of Friday’s sharp losses (Brent and WTI both up by just over $1). There is evidently still some optimism a production accord can be reached as OPEC ministers meet informally in Algiers.

Coming Up

TV screens the world over are set to be tuned in to watch the first of the scheduled debates between Donald Trump and Hillary Clinton – from 11:00 AEST.

Not a newspaper given to hyperbole, here’s what the UK Independent had to say about it:

‘Given its potential to decide if Donald Trump assumes the leadership of the free world, the imminent presidential debate feels like a fairly significant TV event.

‘For those unfamiliar with ironic understatement, I should translate. In this context, “fairly significant” means “the single most crucial event in the global history of television”.

Snap judgement in markets on whether The Donald is regarded as having scored points over Hillary, or vice versa, is likely to be show up first in the Mexican Peso. This is the FX market’s current weapon of choice, such is the level off concern that were Trump to win, he would unleash a trade war with Mexico (Mexico and China having to date borne the brunt of Trump’s broadsides against trade relationships he regards as causing the greatest hurt to American jobs). The peso has already lost 11% against the US dollar since mid-August, but has the potential to lose much more if Trump is seen to be further narrowing the poll gap with Clinton – or indeed move ahead of her.

The only thing of note on the economic calendar is tonight’s US Conference Board consumer confidence reading. In the past few months this has been performing much better than the University of Michigan’s version (see Chart of the Day). The latter has fallen from 93.5 to 89.8 since June; the Conference Board’s version has risen from 97.4 to 101.4.  Both can’t be right.

Overnight

On global stock markets, the S&P 500 was -0.86%. Bond markets saw US 10-years -3.79bp to 1.58%. In commodities, Brent crude oil +2.31% to $46.95, gold-0.1% to $1,337, iron ore -0.0% to $56.77. AUD is at 0.7636 and the range since yesterday 5pm Sydney time is 0.7603 to 0.7649.

For full analysis, download report:

•  Markets Today: 27 September 2016 (PDF, 97kb)

For further FX, Interest rate and Commodities information visit nab.com.au/nabfinancialmarkets

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