US equity futures fluctuated between gains and losses as midterm election results rolled in, with investors looking for signs of government gridlock, which may be positive for shares.
(Bloomberg) — US equity futures fluctuated between gains and losses as midterm election results rolled in, with investors looking for signs of government gridlock, which may be positive for shares.
Euro Stoxx 50 futures declined and an Asian equity gauge was flat. Shares of Chinese developers jumped the most in eight months as a regulator expanded financing support for the sector, bucking weakness in broader indexes in Hong Kong and the mainland.
The dollar and Treasury yields were little changed. Cryptocurrencies slipped further as Binance Holdings Ltd.’s potential takeover of embattled rival exchange FTX.com highlighted how strains in the digital-asset industry are buffeting some of its top players.
Optimism for shares has been helped by a history of robust performance following midterm results. Stocks have tended to flourish during times when government is constrained and polls suggest Republicans could make gains, placing a check on Democratic policies.
Republicans made gains in their drive to take control of Congress but many of the closest races had yet to be called. The final outcome may not be known for days or even weeks if the results are as close as polls have suggested and if losers challenge results.
For many investors though, the bigger issue facing markets is the Federal Reserve’s monetary tightening.
“The stock market historically has performed well after midterm elections and during third years of presidential cycles,” according to a note from Yardeni Research. “But none of these positive political cyclical trends will make much difference if inflation remains elevated, which would force the Fed to cause a hard landing of the economy.”
Thursday’s consumer-price-index data may be the next event risk for the Fed’s policy rate and comes on the heels of core consumer prices rising more than forecast to a 40-year high in September. Even if prices begin to moderate, the CPI is far above the central bank’s comfort zone.
“The market is still going to fixate on inflation, which is going to stay high and sticky at least over the next couple of quarters,” Luke Barrs, global head of fundamental equity client portfolio management at Goldman Sachs Asset Management, said on Bloomberg Television.
The turmoil in crypto markets came out of an unexpected development, with billionaire Changpeng “CZ” Zhao consolidating his position atop the crypto world on Tuesday with a move to take over FTX.com. Terms of the emergency buyout were scant, helping to send prices of cryptocurrencies tumbling after a brief rebound.
Oil dropped for a third day on the challenging outlook for Chinese demand and after an industry report pointed to rising US inventories. Gold also declined, after jumping the most in a month.
Key events this week:
- EIA oil inventory report, Wednesday
- US wholesale inventories, MBA mortgage applications, Wednesday
- Fed officials John Williams, Tom Barkin speak at events, Wednesday
- US CPI, US initial jobless claims, Thursday
- Fed officials Lorie Logan, Esther George, Loretta Mester speak at events, Thursday
- US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.3% as of 6:42 a.m. in London. The S&P 500 rose 0.6%.
- Nasdaq 100 futures fell 0.1%. The Nasdaq 100 rose 0.8%
- Euro Stoxx 50 futures fell 0.5%
- Japan’s Topix index fell 0.4%
- Hong Kong’s Hang Seng Index fell 1.7%
- China’s Shanghai Composite Index fell 0.5%
- Australia’s S&P/ASX 200 Index rose 0.6%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro fell 0.1% to $1.0062
- The Japanese yen was little changed at 145.78 per dollar
- The offshore yuan fell 0.3% to 7.2528 per dollar
Cryptocurrencies
- Bitcoin fell 1.6% to $18,393.72
- Ether fell 2.5% to $1,302.99
Bonds
- The yield on 10-year Treasuries advanced two basis points to 4.15%
- Australia’s 10-year yield declined 17 basis points to 3.87%
Commodities
- West Texas Intermediate crude fell 0.1% to $88.80 a barrel
- Spot gold fell 0.2% to $1,709.70 an ounce
–With assistance from Vildana Hajric and Muyao Shen.
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