U.S. equities traded lower on Wednesday on the uncertainty in the US mid-term elections as well as a renewed sell-off in cryptocurrencies weighing on risk assets.
United States
As of 2:50pm in New York, the S&P500 weakened -1.73% with all sectors lower and 90% of stocks weaker. The Dow Jones was also -1.78% lower along with the Nasdaq Composite -2.38% and Russell 2000 -2.33% with the VIX rising 2.86% to 26.27. Keith Lerner, of Truist Wealth emphasized the impact of elections on the market stating, Elections matter, but other factors matter more for markets and the economy”. In the mid-term elections, the Republicans look set to claim a narrow majority in the house, disappointing those who expected a “red wave” while the Senate hangs in the balance as with a George run-off election likely for December 6th to determine control. While not the decisive Republican victory many had been predicting, control of the house will likely see Washing return to gridlock, a situation that has historically benefited risk assets. Meanwhile economic data released on Wednesday showed a decline in mortgage applications in the US by -0.1% in November, falling at a slower pace compared to -0.5% from the week prior. In focus overnight is the release of inflation data for October, forecast to show a modest moderation in price increases.
In corporate news, META confirmed 11,000 employee layoffs after stating it was doubling down on the risky metaverse bet amid declining advertising markets and historically high inflation. Disney released earnings that fell below expectations, stating the company would look for “meaningful efficiencies” in terms of evaluating costs. Regulators in the US began investigating the beleaguered cryptocurrency exchange FTX.com and its mishandling of customers’ funds. In relation, bitcoin sank by 11.8% to $17,071
Europe
Equity markets in Europe closed lower on Wednesday following strong gains over the past few weeks. The Euro Stoxx 600 slipped by -0.30% paring larger declines after news Russia had ordered the withdrawal of troops from the Ukraine city of Kherson. The energy sector was down by -1.66% due to falling oil prices, information technology losing -0.69% and materials declining -0.47%. Utilities and real estate made the largest gains rising by +1.01% and 0.98%. The CAC declined -0.14%, the Dax fell -0.16% while the FTSE closed +0.6% higher.
Elsewhere, Chinese inflation rose 2.1% in October on a year-on-year comparison, falling below forecasts 2.4%. The country’s climate envoy spoke on supporting developing countries by compensating them for losses and damages due to climate change. The COP37 climate summit where the delegate was in attendance stated, “It is not the obligation of China but we are willing to make our contribution and make our effort.”
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
Australia
The ASX is expected to open lower today with ASX futures down -48 points or -0.69% to 6,949. The ASX was up 0.58% higher at 699.3 on Wednesday, despite nine of the twelve sectors closing in the red. The market was boosted by materials, real estate and financials which gained +2.47%, +1.38% and +0.22% respectively. The biggest laggard was the communication sector, falling by -1.41% followed by consumer staples and information technology which slipped by -0.39% respectively. Gold producers led the gains, with St. Barbara soaring by 13%, Regis Resources rising 12.7%, De Grey and Evolution mining jumping 9.4% and 9.3% respectively, while BHP and Fortescue Metals added more than 2%. Head of research at NAB’s commodities, Baden Moore attributed the gains in gold prices and iron ore to a weaker dollar referring to the trend as a “more risk-on move overnight”. Whitehaven fell -8.5% on the news of reduced production due to higher rainfall at its Maules Creek Mine. Medibank Private’s share price slipped -0.4% after hackers released sensitive customer data on to the dark web.
Commodities
WTI and Brent Crude oil prices sank by -3.12% and -2.51% to $86.18 and $92.08 respectively. Data released on Wednesday revealed US oil stockpiles were higher than expected, at 5.6 million barrels compared to forecasts of 1.1 million. Precious metals saw the spot gold down by -0.38% to a price of $1,706, and spot silver down by -1.12% to $21.11. Industrial metals were mixed with copper declining by 0.10% to $368, nickel jumped 2.64% to $23,907 while SGX Iron Ore rose by +1.98% to $87.89.
Economic Calendar:
- Australian Consumer Inflation Expectations (Nov) 11:00
- US Fed Waller Speech 18:00
- Chinese New Yuan Loans (Oct) 19:00
This article was written by James Woods, Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3632.
