Asian markets mixed ahead of US election and inflation data

TOKYO (AP) — Asian stocks were mixed on Tuesday ahead of the U.S. midterm elections, trading is expected to remain bumpy in a week that brings new data on inflation and other events that could rattle markets.

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

Hong Kong’s Hang Seng fell 0.6% to 16,488.44, while the Shanghai Composite Index lost 0.8% to 3,052.93. The Thai SET gained 0.7%. Indian markets were closed for a holiday.

The week is full of events that could affect the market, including US inflation data and the election, which could leave the US government split between Democrats and Republicans.

For Tuesday, at least, “look for markets to trade political headlines rather than 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, along with about a third of the US Senate. On the line is control of both houses of Congress, currently under Democratic leadership.

Voters are also electing governors in most states this year. They will be in office in 2024 during the next presidential election and could affect electoral laws or voting certifications. Many state legislatures and local authorities are also on the ballot.

A divided government would likely result in a stalemate rather than big sweeping policy changes that could upend fiscal and spending plans. Historically, when a Democratic White House has shared power with a Republican split or Congress, stocks have seen bigger gains than usual.

On Monday, the benchmark S&P 500 index 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 performance by Democrats in the election could lead to increased spending to help the economy, which could fuel inflation and force the Federal Reserve to keep raising interest rates to keep prices under control.

It may take some time to get clarification due to the process of counting votes received by mail.

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

Regardless of the outcome of Tuesday’s vote, “it’s still all about inflation and while this report may not be as hot as the latest, it should still show that rents and part of the sector economy’s basic services are still hot,” Edward Moya of Oanda said in a report.

Higher rates drag the economy down by making it more expensive to buy a house, car, or anything else on credit, even if they take time to kick in. Rate hikes could lead to a recession and they tend to weigh on stock prices and other investments.

A fourth consecutive month of moderation in inflation from June’s 9.1% rate could allow the Federal Reserve to relax a little. The Fed said it could soon reduce the size of its increases to half a percentage point, after imposing four consecutive three-quarter-point mega-increases.

Monday’s Wall Street gains came despite a shaky performance for its most influential stock. Apple rose 0.4% after falling earlier in the day. He had warned customers they will have to wait longer to get the latest iPhones after anti-COVID restrictions were imposed at a contractor’s factory in China.

Earnings reports also cause stock prices to fluctuate.

The summer earnings reporting season is about 85% over and S&P 500 companies are on track to post growth of just over 2%. Analysts expect S&P 500 earnings for the last three months of the year to fall by almost 1.5%. They were counting on growth of 4% at the end of September.

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

Brent crude, the international price standard, fell 45 cents to $97.47 a barrel.

The US dollar remained unchanged at 146.63 yen. The euro slipped from $1.0008 to $1.0016.

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