A preview of the day ahead in US and global markets by Mike Dolan.
Common market assumptions of a Republican net sweep of the U.S. Congress in Tuesday’s midterm elections appear to fall far short of early results, leaving investors wondering about the implications for the 2024 race to the White House in addition to the expected political stalemate.
Incumbent Democrats enjoyed a stronger-than-expected performance, with a chance to retain the Senate, limit expected losses in the House of Representatives and win important gubernatorial races. After losing a key seat in Pennsylvania, Republicans must now win two of three Senate races in Georgia, Arizona and Nevada to take control of the chamber.
After a volatile trading session on Wall St on Tuesday, partly swept away by the latest implosion in the cryptocurrency universe, US stock futures were in the red ahead of Wednesday’s open. Dollar and Treasury yields firmed.
A likely legislative stalemate for the next two years had already been assessed – undermining the dollar but supporting stocks and bonds on the premise that no major new fiscal spending would reduce pressure on inflation and the Federal Reserve. But the resilience of the Democratic vote could now trigger an overhaul of the 2024 presidential race, especially as former President Donald Trump is expected to announce next week his intention to run again.
Regardless of the poll results, problems in the crypto world have worsened amid fears of widespread contagion and selling off after a major exchange neared collapse on Tuesday.
Cryptocurrencies faltered again on Wednesday a day after major exchange FTX caved under a rush of withdrawals, forcing a bailout by biggest rival Binance.
Cryptocurrency stalwart Bitcoin, down nearly 75% in the past 12 months, suffered a 20% slump this week as a result – hitting its lowest level in nearly two years on Tuesday before finding a foot just above $17,000. But after a brief overnight rebound, it fell 7% again on Wednesday.
Possibly in part linked to the crypto crisis, shares of Tesla (TSLA.O) fell 5% on Tuesday after documents showed owner Elon Musk sold nearly $4 billion worth of stock Tesla before its takeover of Twitter.
Shares of Walt Disney (DIS.N) fell 9% after the bell on Tuesday after the entertainment giant missed profit forecasts and racked up more losses from its push into video streaming.
With global markets now anxiously awaiting October US inflation figures on Thursday, China said its factory prices fell last month for the first time since December 2020, underscoring weak domestic demand as tight COVID restrictions and a housing slump hammered the economy.
Millions of people in the southern manufacturing hub of Guangzhou will have to take COVID-19 tests on Wednesday in a bid to control the city’s worst outbreak. But while China’s broader stock indexes were in the red on Wednesday, shares of Chinese property developers rebounded as regulators expanded a program to support bond issuance in the troubled sector.
The yen held steady after Japan said its current account surplus fell in the first half of fiscal 2022 to its lowest level in eight years, largely due to soaring commodity prices raw materials imported at dollar prices.
Key developments that could guide US markets later on Wednesday:
* Remaining US Congressional Midterm Election Results
* Richmond Federal Reserve Chairman Thomas Barkin speaks
* US Treasury Auctions 10-Year Notes
* Profits from American companies: DR Horton, Wynn Resports, Roblox
* Finance ministers meet at COP27 climate conference in Egypt
By Mike Dolan, editing by Robert Birsel firstname.lastname@example.org. Twitter: @ReutersMikeD
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