LONDON—World stocks stalled below recent seven-week highs on Wednesday, while the dollar rose as investors awaited the results of the closely watched U.S. midterm election.
Bitcoin, the biggest cryptocurrency by market value, fell as much as 5 percent, a day after sliding 11 percent.
European stock markets and U.S. futures were lower, Meta Platforms Inc. said on Wednesday the Facebook parent would let go of 13 percent of its workforce, more than 11,000 employees, in one of the biggest layoffs this year.
Asian shares edged up as the U.S. midterm election results rolled in, with MSCI’s World Stock Index dipping below Tuesday’s seven-week peak.
Republicans made modest gains in the midterm vote but Democrats did better than expected, and control of Congress and President Joe Biden’s agenda was unclear on Wednesday morning.
Many of the most competitive races were too close to call.
“It does look like it’s a bit tighter than expected. The expectation is still for the Republicans to flip the House of Representatives,” said Fiona Cincotta, senior markets analyst at City Index in London.
Stock markets have tended to perform better under a split government when a Democrat is in the White House, with investors attributing some of that performance to political gridlock that prevents either side from making major policy changes.
Average annual S&P 500 returns have been 14 percent in a split Congress and 13 percent in a Republican-held Congress under a Democratic president, according to data since 1932 analyzed by RBC Capital Markets. That compares with 10 percent when Democrats controlled the presidency and Congress.
Florian Ielpo, a portfolio manager from Lombard Odier Asset Management said that Thursday’s inflation data was a larger concern for markets than the U.S. midterms.
“The perspective of that inflation number overshadows everything else, inclusive of the U.S. political situation. We need lower inflation to keep our eyes off the Fed and start looking elsewhere,” said Ielpo, who heads the macro and multi asset departments for the Swiss asset manager.
Economists polled by Reuters expect Thursday’s inflation data to show a decline in yearly core numbers to 6.5 percent in October from 6.6 percent a month earlier.
U.S. money markets price in a 50 basis point Fed interest rate hike in December and a roughly 33 percent chance of a bigger 75-bps increase.
Crypto Woes
Focus remained on crypto currencies a day after crypto giant Binance signed a nonbinding agreement to buy FTX’s non-U.S. unit to help cover a “liquidity crunch” at the rival exchange, in a stunning bailout that raised fresh concerns among investors about cryptocurrencies.Bitcoin dropped, at one point, over 5 percent to $17,615, while FTX’s native token slid a further 23 percent to $4.417.
In broader currency markets, the dollar was steady at around 145.71 yen, while the euro was just a touch softer at $1.0049. Sterling fell 0.78 percent to $1.1456 having rallied 3.5 percent in the last three trading sessions.
Oil prices edged lower as industry data showed U.S. crude stockpiles rose more than expected and on worries a rebound in COVID-19 cases in top importer China would hurt fuel demand. U.S. crude fell around 0.8 percent to $88.14 per barrel and Brent was at $94.56, down 0.8 percent on the day.
