World shares slip as markets await US midterm election results, price data

World shares were mostly lower on Wednesday as investors awaited the outcome of the US midterm elections and a major inflation update due on Thursday.

Benchmarks fell in London, Paris, Frankfurt and Tokyo. Chinese shares declined after weak inflation data provided further evidence of weakening demand in the world's second-largest economy. US futures also declined.

With votes still being counted across the country, Republicans still had the opportunity to win control of Congress. But Democrats showed surprising strength, defeating Republicans in some competitive races despite expectations that inflation and President Joe Biden's low approval ratings would drag the party down.

The elections could determine how much is done in the next several years in Washington, and possibly beyond. If Republicans gain control of at least one house of Congress, standoffs with the Democratic White House could stymie progress on legislation.

Stocks rallied recently on expectations Republicans might win control of at least the House of Representatives. A surprise win by Democrats could upset markets if investors expect higher corporate taxes and other policy changes.

Vote tallies were likely to continue for a few days at least.

Early on Wednesday, Germany's DAX had fallen 0.8 per cent to 13,584.82 and the CAC 40 in Paris was 0.5 per cent lower, at 6,412.25.

Britain's FTSE 100 shed 0.3 per cent to 7,281.54. The futures for the S and P 500 and Dow industrials were down less than 0.3 per cent.

On Wall Street, the S and P 500 rose 0.6 per cent on Tuesday, while the Dow Jones Industrial Average climbed 1 per cent. The Nasdaq composite gained 0.5 per cent.

In Asian trading, Tokyo's Nikkei 225 index slipped 0.6 per cent to 27,716.43 after the Cabinet on Tuesday approved a 29.1 trillion yen (USD 190 billion) supplementary budget to fund planned economic stimulus for the world's third-largest economy.

Chinese markets declined after the government reported consumer price inflation eased to 2.1 per cent in October from 2.8 per cent in September.

Producer price inflation (PPI) dropped into deflationary territory, falling to minus 1.3 per cent from 0.9 per cent in October, the 21st straight month in an even stronger sign that the No. 2 economy is slowing.

China inflation data printed a rather gloomy picture, with PPI remaining deflationary and CPI much weaker than expected, pointing to waning demand, Stephen Innes of SPI Asset Management said in a commentary.

Hong Kong's Hang Seng lost 1.2 per cent to 16,358.52 and the Shanghai Composite index shed 0.5 per cent to 3,048.17.

In Seoul, the Kospi gained 1.1 per cent to 2,424.41, while Australia's S and P/ASX 200 rose 0.6 per cent to 6,999.30.

A more important milestone for markets this week than the election may be Thursday's report on inflation, which will affect the interest-rate hikes the Federal Reserve is pushing through to get it under control.

By raising rates, the Fed is intentionally slowing the economy by making it more expensive to borrow money. High rates also tend to drag down prices for stocks and other investments while raising the risk of a recession.

The Fed has already hiked its key overnight rate to a range of 3.75 per cent to 4 per cent, up from virtually zero in March, and more investors are expecting it to top 5 per cent next year.

A softer reading than expected on Thursday could give the Fed leeway to loosen up a bit. Economists expect the report to show a continued, slight moderation from a peak set during the summer. But a worse-than-expected reading could have the opposite effect.

In other trading on Wednesday, US benchmark crude oil gave up 24 cents to USD 88.67 per barrel in electronic trading on the New York Mercantile Exchange.

Brent crude, the international pricing standard, lost 21 cents to USD 95.15 per barrel in London.

The dollar slipped to 145.72 Japanese yen from 145.65 yen. The euro fell to USD 1.0059 from USD 1.0076.