Nov 6, 2018, by Lorcan Roche Kelly
Welcome to election day. When the polls close this evening, we will start to find out if the Democrats have done enough to flip the House, or if President Donald Trump’s vigorous campaigning has been enough to help the Republicans retain control of Congress. The mostly likely scenario projected by pollsters – a Democrat-controlled House and a GOP Senate – is seen by markets as the base case and an outcome that would do little to upset equities.
A composite purchasing managers index for the euro area fell to 53.1 in October, the lowest level since September 2016, while a gauge of business expectations was at the weakest level since 2014. A composite index for Italy dropped to 49.3, indicating a contraction, while there was better news for Germany where data showed an unexpected rise in factory orders. The slowdown in the region comes as global trade fears continue to weigh on sentiment. Speaking at Bloomberg’s New Economy Forum in Singapore, Chinese Vice President Wang Qishan said that Beijing remained ready to talk to the U.S. on trade but warned that the country wouldn’t be “bullied and oppressed by imperialist powers.”
Stop me if you’ve heard this one before: U.K. Prime Minister Theresa May is redoubling her efforts to secure a Brexit deal this month. The key issue of the Northern Ireland border remains the main stumbling block. The options now available mean that either the U.K. stays in the customs union for an extended period, or it allows Northern Ireland to have a separate customs arrangement with the European Union – both of which are seen as unpalatable by the Brexit-supporting members of May’s cabinet. However, those concerns may be overruled by the economic reality of leaving the EU without a deal.
Overnight, the MSCI Asia Pacific Index climbed 0.8 percent while Japan’s Topix index closed 1.2 percent higher, with Toyota Motor Corp. leading gains after boosting its profit outlook. In Europe, the Stoxx 600 Index was 0.2 percent lower at 5:45 a.m. Eastern Time in a fairly broad-based selloff amid lower-than-usual volumes. S&P 500 futures pointed to a drop at the open, the 10-year Treasury yield was at 3.195 percent and gold was higher.
While election coverage will dominate the news today, there are a few other things worth keeping an eye out for. The Treasury department is due to sell $106 billion of short-term bills at 11:30 a.m. and $27 billion of 10-year notes at 1:00 p.m. The oil market, where prices have been under pressure lately, will get both the EIA’s energy outlook and API U.S. inventory data today. In earnings, Eli Lilly & Co., CVS Health Corp. and Papa John’s International are among companies reporting.