European markets pull back slightly as investors await U.S. midterm results

Elliot Smith & Holly Ellyatt

European markets were slightly lower on Wednesday as global investors await the results of the U.S. midterm elections.

European markets

TICKER	COMPANY	PRICE	CHANGE	%CHANGE
.FTSE	FTSE 100	7270.5	-35.64	-0.49
.GDAXI	DAX	13599.49	-89.26	-0.65
.FCHI	CAC 40 Index	6422.27	-19.23	-0.3
.FTMIB	FTSE MIB	23734.26	40.09	0.17
.IBEX	IBEX 35 Idx	7981.7	-17.2	-0.22

The pan-European Stoxx 600 was down 0.4% in early trade, with travel and leisure stocks shedding 1% as most sectors and major bourses slid into the red.

The midterm elections will determine whether Democrats keep their slim majorities in the House and Senate, or if Republicans will seize control of one or both chambers of the legislature, an outcome that would mean there’s a significant power shift in Washington and the potential for gridlock.

The outcome could make all the difference for President Joe Biden, whose legislative hopes rest on whether Democrats can push his agenda through a hyper-partisan Congress.

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Overnight, U.S. stock futures were basically flat while Asia-Pacific stocks were mixed as investors awaited the results of the midterms.

Stocks on the move: Smiths Group up 5%, Evotec down 11%

Quarterly earnings remain a key driver of individual share price movement in Europe.

Shares of German drug company Evotec plunged more than 11% to the bottom of the Stoxx 600 after its results.

At the top of the index, Smiths Group shares climbed 5% after the British engineering firm posted a 13% rise in quarterly organic revenue.

– Elliot Smith

Control of the House will not be determined tonight, NBC News says

Control of the House of Representatives will not be decided on election night, according to NBC News.

Republicans only need to gain 5 seats to take the House and were considered heavy favorites entering the day, but the red wave expected by some investors has failed to materialize. Democrats appear to have won some surprise victories in Ohio and North Carolina.

The NBC News election model currently estimates that the Republicans will end up with a three-seat advantage in the House, but that projection has a large margin of error.

If Democrats continue to hold their ground, control of the House could remain uncertain for days or even weeks. There are several competitive House races in California, a state that often takes a long time to count votes.

— Jesse Pound

CNBC Pro: Want to play rising copper prices? Analysts give these 2 stocks more than 200% upside

Copper is having a good month, with both prices and mining stocks trading well in the green.

Against this backdrop, CNBC Pro screened the Global X Copper Miners ETF on FactSet for stocks that analysts expect to outperform.

Two names stand out as having target price upside of more than 200% and a buy rating from all of the analysts covering them, according to FactSet data.

— Weizhen Tan

Divided government is a positive in the inflation fight, says Minerd

Guggenheim Partners’ global CIO Scott Minerd said on CNBC’s “Business on the Ballot” that Republican gains in Congress could help inflation ease in the coming years.

“Divided government is a great outcome. … Divided government is going to mean very little movement on the fiscal side, which means we aren’t going to get tax cuts nor are we going to get much of an increase in government spending. That’s good from a standpoint of allowing the economy to cool off more and may actually limit the amount of hiking that the Fed has to do,” Minerd said.

Most key races remain too close to call, according to NBC News.

— Jesse Pound

CNBC Pro: An investment bank is using AI to analyze Q3 earnings calls. Here’s what it found

Nomura, Japan’s largest investment bank, is using AI to analyze earnings calls transcripts to predict whether a stock will outperform.

Its research on third-quarter results also shows the sectors with the most positive and negative sentiment.

— Ganesh Rao

CNBC Pro: Pros name 3 picks in one top-performing sector, including a Warren Buffett favorite

This sector is among the top performers on the S&P 500 this month. Three market pros weigh in on their favorite names in the sector, including one that is loved by Warren Buffett.

— Zavier Ong

S&P 500 usually gains big in year after midterms — even in a recession

History shows the stock market typically rises the year after midterm elections — even with a recession.

The year following midterms has historically been a strong one for the S&P 500, with the benchmark gaining 20.1% on average, according to Citigroup data going back to 1960.

Even when there’s a recession the next year, returns are surprisingly robust, with the S&P 500 rising 24.4% on average during three instances in 1974, 1990 and 2006, Citi said. That’s especially pertinent now, with many economists expecting an economic downturn in 2023 in the wake of the Federal Reserve’s aggressive rate hikes to tame inflation.

— Yun Li

China’s producer prices drop, inflation slows in October

China’s producer price index fell 1.3% in October on an annualized basis after rising 0.9% in September, beating estimates for a 1.5% contraction in a Reuters poll.

The nation’s October PPI marks the first decline since December 2020, according to FactSet data.

China’s consumer price index rose 2.1% in October compared to a year ago, easing after climbing 2.8% in September.

The onshore and offshore Chinese yuan hovered around 7.2500 levels shortly after the economic data release.

— Evelyn Cheng, Jihye Lee

European markets: Here are the opening calls

European markets are set to open lower Wednesday, with investors keeping a close eye on the U.S. midterm election results.

The U.K.’s FTSE index is expected to open 17 points lower at 7,290, Germany’s DAX down 37 points at 13,645, France’s CAC down 14 points at 6,426 and Italy’s FTSE MIB down 86 points at 23,498, according to data from IG.

Earnings come from Adidas, Bilfinger, Commerzbank, E.On, Siemens Healthineers, Ahold Delhaize, ABN AMRO, M&S, Aviva, ITV and JD Wetherspoon.

Data releases on Tuesday include Russian inflation figures for October.

— Holly Ellyatt

Source : CNBC