LONDON, Nov 9 (Reuters) – Global stocks tumbled below recent seven-week highs on Wednesday, while the dollar held steady as investors awaited the results of the closely watched U.S. midterm election.
Bitcoin, the largest cryptocurrency by market value, was under pressure again and fell more than 3%, a day after slipping 11%.
European stock markets were down (.STOXX), US stock futures were mixed and Asian stocks (.MIAPJ0000PUS) edged higher as US midterm election results came in. All of this left MSCI’s World Stock Index (.MIWD00000PUS) stuck just below Tuesday’s sevens. – peak week.
Control of the US Congress was up for grabs after the election, with most of the most competitive races not called, it was unclear whether Republicans would break the Democrats’ tenuous grip on power.
“It looks like it’s a little tighter than expected. Republicans are still expected to overthrow the House of Representatives,” said Fiona Cincotta, senior markets analyst at City Index in London.
“US equity futures are pushing higher on the idea that the political stalemate is favorable to equities, as it has historically been the case.”
Stock markets have tended to perform better under a divided government when a Democrat is in the White House, with investors attributing some of that performance to the political stalemate that prevents either side from bringing in major political changes.
Average annual returns for the S&P 500 have been 14% in a divided Congress and 13% in a Republican-held Congress under a Democratic president, according to data since 1932 analyzed by RBC Capital Markets. That compares to 10% when Democrats controlled the presidency and Congress.
Stuart Cole, chief macroeconomist at Equiti Capital, said the potential political stalemate in Washington likely means an end to the corporate and wealthy tax hikes proposed by President Joe Biden.
“But the prospect of another battle over raising the US debt ceiling and the prospect of government shutdowns as Democrats and Republicans argue over it looms large,” he said. .
In Asia, Japan’s blue-chip Nikkei stock index (.N225) fell from a two-month high as poor results from video game maker Nintendo weighed. China stocks (.SSEC), (.HSI) fell as data showed China’s producer prices fell for the first time since December 2020, underscoring weak domestic demand amid restrictions related to COVID-19.
The focus remained on cryptocurrencies a day after crypto giant Binance signed a non-binding deal to buy FTX’s non-US unit to help cover a “cash shortage” in the US. rival exchange, in a stunning bailout that has sparked fresh concerns among investors about cryptocurrencies.
Bitcoin was last down more than 3% at $17,917, while the native FTX token slid another 27%.
With the focus on the US midterm elections and Thursday’s key inflation figures, broader trading in the currency markets was generally subdued.
The dollar was down about a fifth of a percent at 145.45 yen, while the euro was just a little lower at $1.0064.
Economists expect Thursday’s inflation data to show a decline in core annual figures to 6.5% in October from 6.6% a month earlier.
US money markets are pricing a 50 basis point Fed interest rate hike in December and a roughly 33% chance of a larger 75 basis point hike.
Oil prices edged lower as industry data showed U.S. crude inventories rose more than expected and fears a rebound in COVID-19 cases at China’s top importer could affect fuel demand. U.S. crude fell about 0.7% to $88.22 a barrel and Brent to $94.78, down 0.6% on the day.
Reporting by Dhara Ranasinghe and Nell Mackenzie; Additional reporting by Ankur Banerjee in SINGAPORE and Lucy Raitano in LONDON; Editing by Toby Chopra
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