Morning Bid: So much for a quiet day before the US midterms

Global Markets React to US Midterm Elections and AI Selloff

Market Movements and Key Drivers

A look at the day ahead in European and global markets from Gregor Stuart Hunter

Pre-Election Volatility and AI Trade Impact

Sorry to disappoint if you were hoping for any calm before the storm. With voting about to begin for the US midterm elections, it might have been a quiet session, were it not for the fact that the AI trade is buckling again.

Asian Market Performance

Tech hardware suppliers sank in Asian trade on Tuesday, sending MSCI's broadest index of regional shares outside Japan down 1.4% to the lowest level in a week and a half.

Regional Declines and Corrections

Leading the declines were a fall of as much as 4.1% in South Korean shares and a 3.6% drop in Taiwanese shares, which are on track to confirm a technical correction after extending losses to 13.3% from a record high in early October.

S&P 500 e-mini futures edged lower for a fourth consecutive day, off 0.1%, while Japanese markets were closed for a holiday.

European and Australian Market Trends

In early European trades, pan-region futures fell 0.9%, German DAX futures slid 0.8% and FTSE futures were 0.2% lower.

Australian shares bucked the regional trend, rising 0.3%, and the Aussie dollar slipped 0.2% after the Reserve Bank of Australia lifted its cash rate target by 25 basis points to a near two-decade high of 4.85% in a split six-to-three vote. Some analysts think the central bank is done hiking for now after 125 basis points of hikes this year.

Corporate Earnings and Commodities

Apple and Tech Sector Developments

Apple shares extended losses, falling 2.8% in after-hours trading after the iPhone maker on Monday forecast lower gross margins for the crucial holiday quarter, citing rising memory-chip costs, and projected services revenue growth that fell well short of Wall Street expectations.

Oil Prices and Geopolitical Tensions

Oil prices steadied after a fall on Monday, with Brent crude 0.4% higher at $105.19 in Asian trading as investors weighed the state of peace talks between the US and Iran. The US carried out strikes on Iran's Qeshm Island in the Strait of Hormuz, a US official told Reuters on Monday, confirming an earlier Wall Street Journal report.

US Midterms and Market Sentiment

Election Outlook and Prediction Markets

Voting also begins in the US midterms later on Tuesday. Opinion polls favour the Democrats to win the House, though the Senate remains too close to call.

Prediction market sites Polymarket and Kalshi currently assign probabilities of 77% and 76%, respectively, that the Democrats will control the Senate, but after being wrongfooted during Brazil's presidential election, traders are a little more distrustful this time.

Key Events to Watch

Corporate Earnings Reports

European corporate earnings:

Associated British Foods <ABF.L>, Lufthansa, Geberit, Koninklijke Philips, Bayer, Ferrari, Intesa Sanpaolo, Raiffeisen Bank International

North American corporate earnings:

AMD, Amgen, Shopify, Pfizer, Thomson Reuters

Economic and Debt Events

Economic events:

France: Budget balance for September

Debt auctions:

Germany: 5-year government debt

UK: 10-year government debt

(Reporting by Gregor Stuart Hunter; Editing by Jamie Freed)