Markets steady on eve of US midterm vote

Most Gulf Markets Extend Gains On Rate Cuts; Regional Tensions Weigh

LONDON: Stock markets on both sides of the Atlantic held steady on Monday as cautious investors eyed the upcoming US midterm elections, the resumption of Washington’s sanctions on Iran and brewing fiscal fears in Italy.

Wall Street opened narrowly mixed, with the Dow adding 0.2 percent in the first minute of trading.

In Europe, Frankfurt edged 0.1 percent higher, while Paris rose 0.3 percent and London climbed 0.5 percent. Milan shed 0.4 percent on ongoing worries over Italy’s national accounts.

Global oil prices meanwhile came off lows after the US reimposed sanctions on Iran, which is the OPEC cartel’s second-biggest player after Saudi Arabia.

Markets.com analyst Neil Wilson said traders are focused “on US midterms on Tuesday, whilst questions over the Italian budget continue to impact risk sentiment.

“Iran sanctions have come into force but it looks like oil prices have already factored in the impact on the market. Estimates about how much oil will be lost as a result of the measures have varied widely,” he added.

– ‘Worst case scenario’ for markets-

Traders are now eyeing Tuesday’s US midterm elections, which are seen as a vote on President Donald Trump’s performance since taking the White House, with the Democrats looking to take control of the House of Representatives.

“The results of Tuesday’s US midterm elections will decide which party controls the House and Senate,” noted FXTM analyst Hussein Sayed.

He said the “market’s worst-case scenario would be the Democrats controlling both houses as future fiscal policy trajectory becomes uncertain.”

Briefing.com analyst Patrick O’Hare said the election could produce some volatility but the real factors moving the markets are elsewhere.

“Pay attention, but don’t let the knee-jerk responses distract you from this important point: the hurdles for the stock market are rising interest rates, the trade tension between the US and China, and the slowdown in foreign economic (activity), all of which are a headwind for earnings growth,” he said.

Oil prices rose modestly as Washington reimposed sanctions on Tehran but exempted China, India and Japan who still source significant amounts from Iran.

The markets also expect major producers Saudi Arabia and Russia will ramp up exports to make up for the shortfall from Iran.

– Asian stocks stumble –

Asian bourses meanwhile fell Monday after Trump’s top economics adviser downplayed the chances of a quick deal to end the China-US trade war, taking the steam out of last week’s rally.

The US leader had fuelled a surge in the region’s equities Friday by tweeting that he had held positive talks with Chinese President Xi Jinping, before a report said he had even asked officials to draw up a draft bill with an eye on a potential agreement.

But White House economics adviser Larry Kudlow later tempered expectations, telling CNBC “there’s no massive movement to deal with trade”.

That news sent Wall Street into the red on Friday as investors shrugged off impressive US jobs data.

– Key figures around 1430 GMT –

London – FTSE 100: UP 0.5 percent at 7,126.33 points

Frankfurt – DAX 30: UP 0.1 percent at 11,534.48

Paris – CAC 40: UP 0.3 percent at 5,114.85

Milan – FTSE MIB: DOWN 0.4 percent at 19,314.03

EURO STOXX 50: UP 0.3 percent at 3,225.47

New York – Dow: UP 0.2 percent at 25,310.29

Tokyo – Nikkei 225: DOWN 1.6 percent at 21,898.99 (close)

Hong Kong – Hang Seng: DOWN 2.1 percent at 25,934.39 (close)

Shanghai – Composite: DOWN 0.4 percent at 2,665.43 (close)