Global stocks steadied Tuesday, even as interest rates crept higher and the dollar regained its composure against rival currencies, with investors unambiguously focused on the outcome of midterm elections later today that could either stall or extend the longest equity bull market in history.
As Americans head to the polls to chose the 435 lawmakers who will sit in the House of Representatives and the 35 Senate seats up for grabs in this year's election cycle, analysts continue to suggest that Democrats have an 85% chance of recapturing control of the lower house, while their Republican rivals have similar odds to hold the upper chamber.
That result, based on historic data, would likely deliver slower stock market gains over the final two years of President Donald Trump's first term following a 28% gain for the S&P 500 since his November 2016 election, the best performance since Dwight D Eisenhower in the mid 1950s.
Investors appear to have priced-in a Democratic House win, analysts suggest, allowing for the potential for markets to rally hard into the final weeks of the year if Republicans maintain control of Congress and put forward another round of tax cuts.
"The markets are understandably fidgety given the next 48 hours of headline risk. But ultimately its unlikely any asset market will venture out of current boundaries given the plethora of risk events facing traders over the next day to two," said Stephen Innes, head of Asia Pacific trading at Oanda. "There is absolutely no incentive to press the edges today whatsoever."
Asian markets reflected that position Tuesday, with a stronger U.S. dollar pushing the yen into the red, allowing Japan's Nikkei 225 to post a 1.14% gain by the close of trading, while the broader MSCI Asia ex-Japan index was marked 0.4% higher heading into the final hours of trading.
Early indications from U.S. equity futures, however, were modestly softer in early European hours, with contracts tied to the Dow Jones Industrial Average suggesting a 30-point dip for the 30 stock average, while those linked to the S&P 500 indicating an 3.8 point pullback for the broader benchmark.
Eli Lilly (LLY) were an early mover of note, rising 2.6% to $113 each after it posted stronger-than-expected third quarter earnings Tuesday, and boosted its 2018 profit guidance for the second consecutive time this year as its diabetes drug franchise continues to add to the group's bottom line.
European stocks started stronger, with support coming from a weaker single currency, a better-than-expected third quarter earnings season and a softening of rhetoric between Rome and Brussels as the two sides attempt to find a compromise with Italy's 2019 budget submission, but faded in the opening hour of trading to pull the Stoxx 600 0.25% lower to 361.30 points as investors kept risk appetite in check ahead of the U.S. polls later today.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.1% higher in early European trading at 96.40, while benchmark 10-year Treasury bonds were quoted at 3.203% ahead of a $27 billion auction later today.
Global oil prices continued their month long decline Tuesday, following a brief reprieve in the Monday session, as investors continue to focus on softening end demand, and near-record supplies from the world's biggest producers, over the impact of sanctions on the sale of Iranian crude, which kicked-in yesterday.
Brent crude contracts for January delivery, the global benchmark, were seen 60 cents lower from their Monday close in New York and changing hands at $72.57 per barrel , extending their fourth quarter decline past 12.5%, while WTI contracts for December, which are more tightly liked to U.S gas prices, were marked 31 cents lower at $62.79 per barrel.