Next, investors will shift focus towards Thursday’s report on inflation
US stocks rallied for the third consecutive session on Tuesday as investors awaited the results of the midterm elections. As the votes trickle in, odds that Democrats hold onto the Senate surge, which could mean relatively little change for economic policies. The Dow Jones Industrial Average gained 1.02%, the S&P 500 was up 0.56% and the Nasdaq Composite advanced 0.49%. Next, investors will shift focus towards Thursday’s report on inflation, which could affect the Fed’s interest rate hike expectations.
Asian equities were mixed on Wednesday amid the persisting uncertainty surrounding the US elections. Tokyo’s Nikkei 225 index slipped 0.56% and the Hang Seng in Hong Kong also shed 1.61%. The Shanghai Composite index edged 0.46% lower, while the S&P/ASX 200 in Sydney climbed 0.58%. The Kospi in Seoul surged 1.06%. On the data front, China’s October CPI came in at 2.1% y/y versus 2.4% expected, while PPI arrived at -1.3% y/y versus -1.5% expected. Meanwhile, Chinese authorities have lifted their lockdown restrictions for the area around FoxConn iPhone plant.
In Europe, equities opened lower amid political uncertainty in the United States. Following recent gains, US stock index futures turned red as well, with Dow futures down 95 points in early pre-market deals. Adding to a more cautious tone in the markets, the Japanese Coast Guard said North Korea may have fired what could be a ballistic missile.
Meanwhile, the US dollar has steadied on Wednesday after three days of solid losses. The USD index has settled below 110.00, struggling to attract demand after an aggressive sell-off from 113.00. As such, EURUSD has settled around parity while also holding above the key daily moving averages. However, the upside potential looks limited ahead of the US inflation report that could revive demand for the greenback if the figures exceed expectations. The immediate downside target now arrives around 1.0037 where the descending 100-DMA lies.