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Global stocks, dollar hunker down for U.S. midterm elections

Reuters  |  LONDON 

By Marc Jones

(Reuters) - European shares ticked lower and the dollar and bond markets barely budged on Tuesday, as traders braced for midterm elections in the and some potentially lively sessions ahead.

and Hong Kong had helped overcome another Chinese wobble, but slipped into the red early on as investors pounced on some corporate earnings misses and pre-U.S. midterms caution took hold.

The elections mark the first major test of Donald Trump's sweeping tax cuts and hostile trade policies. Polls point to his losing control of the which could curb some of his policymaking power.

The dollar dipped against the euro and sterling, but made up ground on the Japanese yen as dealers kept their options open after the U.S. currency's bumper year so far.

"It is definitely not the time to buy the dip," said & Capital's Pau Morilla-Giner, referring to U.S. and globally-focused stock markets and risk assets.

"Everything that could go well for U.S. consumers in the last couple of years has gone well, but now the tide is turning... At the moment you are running out of drivers of growth in the U.S."

Italian and Spanish stocks weakened as updated PMI figures confirmed euro zone business growth had fallen to a two-year low last month against the backdrop of trade tensions.

The future output index caused even more concern as it fell to a near four-year low of 60.5 from 62.1.

"Euro zone companies reported a disappointing start to the fourth quarter," said Chris Williamson, at which compiles the data.

bond yields were also pushing up after called on to change its budget at a meeting on Monday.

That had done little to ease the standoff between and the over the spending plan. With not likely to bow to the demands any time soon it reignited concerns about a further escalation in the feud.


In Asian trading, MSCI's broadest index of shares ex-edged up 0.4 percent following a positive finish for Wall Street on Monday.

Japan's Nikkei also climbed 1.1 percent though weaker Chinese markets and regional capped the region.

suppliers such as Taiwan's were hit by a report that had told its assemblers to halt plans for additional production lines dedicated to the XR. The report had also driven shares 2.8 percent lower in U.S. trade.

While political gridlock between the and could hinder Trump's pro-business agenda and raise concerns about U.S. political instability, some analysts say this may have already been priced in by investors.

The index, also known as the "black swan" index, hovered not far from its 2-1/2-year low hit Friday, indicating demand for options that provide protection remains tepid.

A higher skew typically indicates investors are buying more protection on heightened anxiety.

"Unlike the U.S. or the U.K.'s Brexit referendum, the upcoming U.S. (midterm) elections are not a binary event," said Yasuo Sakuma, at "So it's unlikely to send stocks significantly in one direction, apart from initial quick reactions."

Gold was little changed but in markets crude prices were near multi-month lows after the allowed eight countries to continue buying from temporarily, easing the likelihood of a sharp supply drop.

U.S. Intermediate (WTI) crude futures slipped 0.3 percent to $62.89 a barrel, after hitting a seven-month low of $62.52 on Monday.

futures dropped 0.6 percent to $72.74 a barrel, near Friday's 2-1/2-month low of $72.16.

Both have slid more than 15 percent since hitting four-year highs in early October.

(Additional reporting by and in Tokyo; editing by David Stamp)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, November 06 2018. 15:28 IST