Asian markets mixed ahead of US elections, inflation data

Asian stocks were mixed on Tuesday ahead of the US midterm elections, and trading is likely to remain volatile during the week, which will bring fresh inflation data and other developments that could shake markets.

Tokyo’s Nikkei 225 rose 1.3% to 27,876.20 on strong earnings reports. The Kospi rose 1.1% to 2,397.41 in Seoul and Australia’s S&P/AXS 200 added 0.4% to 6,958.90.

Hong Kong’s Hang Seng slipped 0.6% to 16,488.44, while the Shanghai Composite index fell 0.8% to 3,052.93. Thailand’s SET rose 0.7%. Indian markets were closed for the holidays.

The week is full of potentially market-moving events, including US inflation data and an election that could lead to a split in the US government between Democrats and Republicans.

At least on Tuesday: “Look for markets to trade the political headline, not the substance,” Stephen Innes of SPI Asset Management said in a commentary.

Every seat in the US House of Representatives is up for election this year, as well as about a third of the US Senate. On the line is control of both houses of Congress, currently held by Democrats.

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This year, voters are also electing governors in most states. They will be in office in 2024, when the next presidential election is held, which may affect election laws or voting certificates. Many state legislatures and local governments are also on the ballot.

A divided government would likely lead to gridlock rather than big, sweeping policy changes that could derail tax and spending plans. Historically, when a Democratic White House has shared power with a divisive or Republican Congress, stocks have seen higher than normal gains.

On Monday, the benchmark S&P 500 rose 1% to 3,806.80, while the Dow Jones Industrial Average gained 1.3% to 32,827.00 and the Nasdaq Composite added 0.9% to 10,564.52.

Analysts say a strong Democratic showing in the election could boost spending to help the economy, which could fuel inflation and prompt the Federal Reserve to keep raising interest rates to control prices.

Due to the mail-in vote counting process, it may take some time to get clarity.

Economists expect Thursday’s report to show that the consumer price index rose 8% in October from a year earlier, slightly below September’s 8.2% inflation rate.

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Regardless of the outcome of Tuesday’s vote: “It’s still about inflation, and while this report might not be as hot as the last few, it should still show that rents and the core services sector of the economy are still hot.” Edward Moya of Oanda said in a report.

Higher rates put a damper on the economy, making it more expensive to buy a home, car or anything else on credit, though it takes time for them to take effect. A rate hike can trigger a recession and tends to drag down the prices of stocks and other investments.

A fourth straight month of declining inflation from June’s 9.1% rate could allow the Federal Reserve to taper a bit. The Fed has said it could soon cut its hike to half a percentage point after four consecutive three-quarter mega hikes.

Monday’s Wall Street rally came despite volatility in its most influential stocks. Apple rose 0.4% after falling earlier in the day. It had warned customers they would have to wait longer to get their hands on the latest iPhones after COVID-19 restrictions were imposed at a contractor’s factory in China.

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Earnings reports also cause stock price fluctuations.

The summer earnings reporting season is about 85% complete, and S&P 500 companies are on track for growth of just over 2%. Analysts expect the S&P 500’s earnings to fall by nearly 1.5% in the final three months of the year. At the end of September, they were forecasting a 4% increase.

In other trading, U.S. benchmark crude lost 50 cents to $91.29 a barrel in electronic trading on the New York Mercantile Exchange. It lost 82 cents to $91.79 a barrel on Monday.

Brent crude, the international benchmark, was down 45 cents at $97.47 a barrel.

The US dollar was unchanged at 146.63 yen. The euro fell to $1.0008 to $1.0016.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, transcribed or distributed without permission.

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