US futures fall as interim yields mixed verdict: Markets fold

US futures fall as interim yields mixed verdict: Markets fold

(Bloomberg) — U.S. stock index futures fell as the midterm elections produced a mixed verdict, challenging expectations of a Republican sweep and a congressional stalemate.

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December contracts for the Nasdaq 100 and S&P 500 were down at least 0.3 percent each, a day after U.S. stocks hit a record high in a three-day rally. Europe’s benchmark stock index extended losses. The sell-off in cryptocurrencies intensified, sending Bitcoin to its biggest four-day drop since June. Bonds fell and the dollar pared losses. Oil fell on a sluggish demand outlook from China.

Stock and bond investors were hoping for a Republican return to Congress, with the best outcome seen as GOP control of both the House and Senate. Dollar bulls, on the other hand, looked for Democratic control continuing in both chambers. Trends so far suggest a mixed verdict, leaving little room for a rally or decisive sell-off.

“The Republicans’ goal of controlling both houses hangs in the balance,” Chris Beauchamp, chief market analyst at IG Group in London, wrote in a note. “A divided House may mean that partisan battles over spending and the debt ceiling are not as dramatic or lively, but that is unlikely to significantly brighten the policy outlook. Instead, the focus will likely return to the Federal Reserve and the US economy.”

Republicans have made gains in their bid to take control of Congress, but many of the closest races have yet to be called. The final result may not be known for days or even weeks if the results are as close as the polls suggest and if the losers contest the results.

Optimism for equities has been helped by a track record of strong performance following mid-term results. Stocks tend to thrive in times when government is tight and polls suggest Republicans could make gains, putting a check on Democratic policies.

Bonds fell across the curve, with the 10-year yield adding 2 basis points. Government bonds in Europe cut their gains.

Shares of Chinese developers posted their biggest jump in eight months as the regulator extended financial support for the sector, offsetting weakness in broader indexes in Hong Kong and the mainland.

Cryptocurrencies fell further as the potential acquisition of rival exchange FTX.com by Binance Holdings Ltd. highlighted how pressures on the digital assets industry are affecting some of its top players. Bitcoin traded 5.5% lower to trade below $17,700 a piece.

Thursday’s consumer price index data could be the next event risk for the Fed’s policy rate and comes after core consumer prices rose more than forecast to a 40-year high in September. Even if prices start to moderate, the CPI is well above the central bank’s comfort zone.

“The market will continue to fixate on inflation remaining high and stable for at least the next two quarters,” Luke Barrs, global head of fundamental equity client portfolio management at Goldman Sachs Asset Management, told Bloomberg Television. .

Key events this week:

  • BEI oil inventory report, Wednesday

  • US Wholesale Stocks 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 movements in the markets:

inventories

  • The Stoxx Europe 600 was down 0.7% at 9:52 a.m. London time

  • S&P 500 futures fell 0.4%

  • Nasdaq 100 futures fell 0.3%

  • Dow Jones Industrial Average futures fell 0.4%

  • The MSCI Asia Pacific Index was little changed

  • MSCI Emerging Markets rose 0.4%

currency

  • The Bloomberg Dollar Spot index was little changed

  • The euro fell 0.1% to $1.0063

  • The Japanese yen was slightly lower at 145.70 per dollar

  • The offshore yuan was down 0.2% at 7.2478 per dollar

  • The British pound fell 0.6% to $1.1470

Cryptocurrencies

  • Bitcoin fell 5.5% to $17,664.44

  • Ether fell 9.6% to $1,208.05

Bindings

  • The 10-year bond yield rose two basis points to 4.14%

  • Germany’s 10-year yield fell three basis points to 2.25%

  • Britain’s 10-year yield rose one basis point to 3.57%

Goods

  • Brent crude was down 0.5% at $94.88 a barrel

  • Spot gold was down 0.1% at $1,710.08 an ounce

–With help from Vildana Hajric and Muyao Shen.

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