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European stocks inched down while US futures held steady on Wednesday as results from America’s midterm elections were filtering in with several key states remaining too close to call.
The regional Stoxx Europe 600 opened 0.2 per cent lower in early trading and London’s FTSE fell 0.1 per cent. Contracts tracking Wall Street’s benchmark S&P 500 swapped between gains and losses while those tracking the tech-heavy Nasdaq 100 added 0.2 per cent.
Many pollsters had predicted a “red wave” of victories for the Republican party as the vote got under way but early tallies for the midterms suggested several key states remained too close to call.
House of Representatives Republican leader Kevin McCarthy said his party was on track to regain control of the lower chamber, where it needs a net gain of five seats for a majority. The battle for the Senate remained in the balance, with races in Georgia, Arizona and Nevada on a knife edge.
Analysts were confident that markets had priced in Republican majorities in the US House and Senate.
“Prediction markets — and probably financial markets — expect a Republican majority in both chambers,” said Jan Hatzius, chief economist at Goldman Sachs.
“The financial market reaction to a Republican win should be muted, as the House outcome is already widely expected,” Hatzius said, adding that a Democratic victory in the House and Senate “would likely weigh on equities, as market participants might expect additional corporate tax increases”.
Over the past 18 midterm election cycles, the S&P 500 has advanced by an average of about 5 per cent in the year leading up to election day, but more than 15 per cent in the 12 months afterwards, according to analysts at Oxford Economics.
Derek Halpenny, head of research for global markets at MUFG Bank, said a relatively disappointing night for Republicans dented Donald Trump’s case for leading the party into the presidential election in 2024, especially after a big win for his rival Ron DeSantis in Florida.
The dollar index slipped 0.1 per cent on Wednesday, with Halpenny predicting a “limited impact” on the US currency if the Republicans ended up winning both chambers of Congress.
Elsewhere, bitcoin fell as much as 3.8 per cent to $17,993 in a broad sell-off of crypto assets after the near collapse of Sam Bankman-Fried’s FTX, one of the world’s largest crypto exchanges, due to a liquidity crunch. Bitcoin fell as much as 17 per cent on Tuesday while smaller coins faced a steeper decline.
In China, the CSI 300 index of Shanghai- and Shenzhen-listed stocks dropped 0.9 per cent, while Japan’s Topix shed 0.4 per cent and Hong Kong’s Hang Seng fell 1.2 per cent.
The Hang Seng Mainland Properties index rose almost 4 per cent after Beijing expanded a programme to support bond sales in the sector, which had been hit by a liquidity crisis.
Additional reporting by Jaren Kerr in New York
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