Gulf Times - Gulf Times Business
European equities slip as Americans vote in polls
European stock markets slipped yesterday on trepidation over US midterm elections seen as a referendum on Donald Trump’s presidency, while US markets showed small gains, dealers said.
Key European markets were down by up to 1% at the close, while Wall Street reversed early declines to post timid gains approaching midday in New York.
London’s FTSE 100 closed 0.9% down at 7,040.68 points, Frankfurt’s DAX 30 0.1% down at 11,484.34 points and Paris’ CAC 40 0.5% down at 5,075.19 points, while EURO STOXX 50 closed 0.3% down at 3,207.42 points.
US market gains appeared less than solid, with Briefing.com analyst Patrick O’Hare saying “don’t be surprised if today’s action has a seesaw feel to it”. Most analysts expect the Democrats will win the House of Representatives, while the Republicans hold onto control of the Senate.
Conventional market wisdom says that equity prices should fall if the Republicans lose both Houses, and should rise if they retain both, dealers said.
Earlier Tuesday, Asian indices had mostly ended higher.
The dollar was under pressure against European currencies.
“Americans will cast their crucial votes in today’s midterm elections, which for many will be a referendum on Trump’s presidency,” noted Rabobank analyst Jane Foley.
“It’s not a surprise to see a mixed picture across global equity markets... as investors are very much in a ‘waitand-see mode’ ahead of today’s US midterm elections,” noted Oanda analyst Dean Popplewell.
“The latest polls suggest the Democrats have a good chance of winning the House and the Republicans have a good chance of retaining the Senate.
“But, if the Republicans surprisingly hold Congress (both houses), the dollar, stocks and Treasury yields would get a lift on the promise of Trumponomics 2.0.”
At stake are all 435 seats in the House of Representatives, 35 seats in the 100-member Senate, 36 governor’s posts and seats in state legislatures across the country.
For almost two years, Trump’s sometimes chaotic administration has enjoyed a largely free hand from the twin Republican-controlled chambers, but the midterms could see his wings clipped.
However, the booming economy traditionally favours the incumbent at this stage of a first-term presidency.
New figures on the eve of the polls confirmed that job growth is soaring and Trump gives himself credit for the “hottest economy on Earth”.
“Businesses are keeping a wary eye on developments as a number of Trump’s policies, including massive tax cuts, had fuelled a nearly 30-percent rally in the stock market this year,” noted City Index analyst Fiona Cincotta.
Tuesday represents the first major electoral test for Trump since he took the White House two years ago and embarked on an “America First” agenda that has split opinion across the country and globally.
While his tax cuts and deregulation helped fire the economy and push stock markets to multiple record highs earlier this year, there is a growing concern that his longrunning trade row with China is beginning to bite.
The vote has the added twist of an investigation that is looking at whether his campaign colluded with Moscow to win the 2016 election.
If the Democrats win both houses of congress, they could push harder for impeachment, fuelling uncertainty.