US equity futures swung between gains and losses and Asian stocks were mixed as investors awaited midterm election results, with potential for government gridlock seen as positive for shares.
(Bloomberg) — US equity futures swung between gains and losses and Asian stocks were mixed as investors awaited midterm election results, with potential for government gridlock seen as positive for shares.
Benchmark indexes climbed in South Korea and Australia while Japan saw a small decline. Shares of Chinese developers jumped the most in eight months as a key regulator expanded financing support for the sector. Broader gauges in Hong Kong and the mainland fell.
The dollar weakened slightly as Treasury yields retreated from their intraday highs. Bond yields fell in Australia and New Zealand, tracking moves in the US on Tuesday.
Crypto tokens were under pressure after a selloff that wiped out about 10% from the price of Bitcoin on Tuesday. Sentiment was dented after the largest crypto exchange swooped in to buy a smaller rival that ran into liquidity trouble.
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.
Still, any final outcome may not be known for days or even weeks if races are as close as polls suggest and if losers challenge results. For many investors, 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 steadied after a two-day decline as traders weighed the support from a weaker dollar and gold 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 were little changed as of 12:17 p.m. in Tokyo. The S&P 500 rose 0.6%.
- Nasdaq 100 futures were little changed. The Nasdaq 100 rose 0.8%
- Japan’s Topix index fell 0.2%
- South Korea’s Kospi index rose 1.1%
- Hong Kong’s Hang Seng Index fell 1.1%
- China’s Shanghai Composite Index fell 0.2%
- Australia’s S&P/ASX 200 Index rose 0.7%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro was little changed at $1.0079
- The Japanese yen rose 0.2% to 145.39 per dollar
- The offshore yuan fell 0.3% to 7.2498 per dollar
Cryptocurrencies
- Bitcoin fell 2.7% to $18,200.14
- Ether fell 2.7% to $1,300.76
Bonds
- The yield on 10-year Treasuries was little changed at 4.13%
- Australia’s 10-year yield declined 14 basis points to 3.90%
Commodities
- West Texas Intermediate crude fell 0.2% to $88.71 a barrel
- Spot gold fell 0.1% to $1,710.24 an ounce
–With assistance from Stephen Kirkland and Emily Graffeo.
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