European stocks fell on Tuesday, while US futures were mixed as investors braced for the results of the country’s midterm elections and the release of crucial inflation data later this week.
The regional Stoxx Europe 600 lost 0.2 per cent in early trading ahead of the release of eurozone retail sales data, which are expected to show a decline in September. London’s FTSE slipped 0.5 per cent.
Contracts tracking Wall Street’s benchmark S&P 500 struggled for direction while those following the tech-heavy Nasdaq 100 fell 0.4 per cent. The S&P and the Nasdaq Composite added 1 per cent and 0.9 per cent, respectively, in the previous session.
The moves come as US voters head to the polls, with the Republican party forecast to gain control of one or both of the two chambers of Congress. The worst outcome for markets would be if a “few tightly fought races and legal challenges dragged on”, delaying results, said Joshua Shapiro, chief US economist at MFR consultancy. But as far as investors are concerned, October’s consumer price index report is the week’s main event.
The data are expected to show headline inflation increasing at an annual rate of 8 per cent, down from 8.2 per cent in September. Excluding more volatile food and energy prices, core inflation is expected to have risen 6.6 per cent year on year, the same rate as the month before.
Higher readings would ratchet up pressure on the US Federal Reserve to raise borrowing costs by 0.75 percentage points for the fifth consecutive month when it next meets in December. Officials at the central bank on Friday suggested interest rates could soon rise by a smaller 0.5 percentage points, however, even as the Fed targets a higher terminal rate in its fight against inflation.
In government bond markets, the yield on the two-year US Treasury, which is particularly sensitive to interest rates, was steady at 4.72 per cent, while the yield on the 10-year was up 0.02 percentage points at 4.23 per cent. Prices fall when yields rise.
The dollar index, which measures the US currency against six others, added 0.2 per cent.
In Asia, equities in Hong Kong and China were down, with the Hang Seng index falling 0.2 per cent and the CSI 300 losing 0.7 per cent.
Source: Financial Times
