European stocks fell slightly while US futures were flat on Wednesday as US midterm election results filtered in, with several key states still too close to call.
The regional Stoxx Europe 600 opened 0.2% lower in early trading and London’s FTSE fell 0.1%. Contracts that track Wall Street’s benchmark S&P 500 traded between gains and losses while those that track the tech-heavy Nasdaq 100 added 0.2%.
Many pollsters had predicted a “red wave” of victories for the Republican Party as voting got underway, but early tallies for the midterms suggested several key states remained too close to call.
Republican House Leader Kevin McCarthy said his party is on track to regain control of the lower house, where it needs a net gain of five seats for a majority. The battle for the Senate hung in the balance, with races in Georgia, Arizona and Nevada on the razor’s edge.
Analysts were confident markets had priced in Republican majorities in the U.S. House and Senate.
“Prediction markets — and probably financial markets — are expecting a Republican majority in both chambers,” said Jan Hatzius, chief economist at Goldman Sachs.
“The financial markets’ reaction to a Republican victory 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 stocks, as market participants could expect additional corporate tax hikes”.
Over the past 18 midterm election cycles, the S&P 500 has averaged about 5% up in the year leading up to election day, but more than 15% in the following 12 months, according to Oxford Economics analysts.
Derek Halpenny, head of research for global markets at MUFG Bank, said a relatively disappointing night for Republicans had shaken Donald Trump’s record for leading the party in the 2024 presidential election, particularly after a big victory for his rival Ron DeSantis in Florida.
The dollar index slid 0.1% on Wednesday, with Halpenny predicting a “limited impact” on the U.S. currency if Republicans eventually win both houses of Congress.
Elsewhere, bitcoin fell 3.8% to $17,993 in a broad crypto asset selloff after Sam Bankman-Fried’s FTX, one of the world’s largest crypto exchanges, nearly collapsed due to a liquidity crisis. Bitcoin fell 17% on Tuesday, while smaller coins suffered a steeper decline.
In China, the CSI 300 index of stocks listed in Shanghai and Shenzhen fell 0.9%, while Japan’s Topix lost 0.4% and Hong Kong’s Hang Seng fell 1.2%.
The Hang Seng Mainland Properties index rose nearly 4% after Beijing expanded a program to support bond sales in the sector, which had been hit by a liquidity crunch.
Additional reporting by Jaren Kerr in New York
