Markets await US midterm results

The war in Ukraine has tended to increase uncertainty regarding inflation and growth prospects. When and with what consequences this war will end is pure speculation, but capital markets are expected to build a certain immunity to the headline risks in the coming weeks. The medium- to long-term consequences, on the other hand, could be significant. It is possible that we are at the beginning of a new bloc formation or a new Cold War. This would put a significant damper on globalization and further fuel higher structural inflation. 

US equities finished Tuesday’s session higher but well off the highs of the day as some caution may have set in ahead of the results of the midterm elections. The Dow Jones Industrial Average rose 1.0%, the S&P 500 increased 0.6%, and the Nasdaq Composite advanced 0.5%. European bourses closed the day higher, with the Euro Stoxx 50 up 0.8% to a 12-week high. Tech shares led gains in the Old Continent, up around 3%, while oil and gas equities fell more than 1.5%. 

Summary

• Asian equity markets were mixed this morning as China’s annualised producer prices fell for the first time in October since December 2020. The Hang Seng index lost 1.4% while the Shanghai Composite and Nikkei 225 shed round 0.4% each. Meanwhile, the Kospi and the ASX 200 both advanced by 1% and 0.6%, respectively. 
• European equity futures edged lower while their US counterparts were seen towards the flatline as investors eye midterm elections results, with focus on the prospects of a gridlock in the US government. 
• Oil prices drifted lower on Wednesday, having lost more than 3% in the previous session, as Covid-related uncertainties in top oil importer China and a larger-than-expected build in US crude inventories dampened the demand outlook. 
• China’s producer price index fell 1.3% in October on an annualised basis after rising 0.9% in September, beating estimates for a 1.5% contraction. Meanwhile, the consumer price index rose 2.1% in October compared to a year ago, easing after climbing 2.8% in September and below market expectations of 2.4%. 
• After a bitterly contested and partisan midterm elections campaign, full results from yesterday’s vote in the US are yet to be delivered. Early this morning, as Democrats were bracing to defend their slim majorities in the House of Representatives and the Senate, there was little sign of the so-called red wave that Republicans had expected or hoped for. 
• Disney fell short of expectations for profit and key revenue segments during the fiscal fourth quarter on Tuesday and warned strong streaming growth for its Disney+ platform may taper going forward. Shares of the company fell roughly 8% in after-hours trading. 
• Activision Blizzard posted adjusted Q3 EPS of $0.68, beating analysts’ expectations of $0.50, as revenues ex-deferrals declined 2.7% year-over-year (y/y) to $1.83 billion, versus the expected $1.70 billion estimate. In January of this year, Microsoft announced plans to acquire the video game holding company for $95.00 per share, and the company’s CEO Bobby Kotick estimates that the transaction will close in Microsoft’s current fiscal year ending June 2023. 
• DuPont announced adjusted Q3 EPS of $0.82, north of the $0.79 estimate, as net sales increased 4% y/y to $3.32 billion, versus the anticipated $3.22 billion, while organic sales rose 11% versus the same period a year ago. The chemical company approved a new share repurchase programme, authorising the repurchase and retirement of up to $5 billion worth of equity. It also moved its full-year outlook to the low end of the prior guidance range, which was roughly in line with estimates.  
• The cryptocurrency market tumbled Tuesday after Binance and FTX, the world’s two biggest crypto exchanges, agreed to merge to address what Binance called a “liquidity crunch.” Bitcoin tumbled 12.6% to $18,203 after an earlier fall to $17,301, its lowest level since November 2020. Ether dived 18.2% to $1,311, after falling as low as $1,229. 
• Tesla CEO Elon Musk sold at least $3.95 billion of the electric-vehicle maker’s shares just days after closing his buyout of Twitter. He unloaded 19.5 million shares, according to regulatory filings on Tuesday, his first disposals since August. Musk had said in August he was done offloading Tesla shares.