Asian markets mixed ahead of US elections, inflation data

TOKYO (AP) – Asian stocks were mixed Tuesday ahead of U.S. midterm elections, with trading likely to remain choppy in a week that brings new inflation data and other events that could shake markets.

Tokyo’s Nikkei 225 rose 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 rose 0.4% to 6,958.90.

Hong Kong’s Hang Seng fell 0.6% to 16,488.44, while the Shanghai Composite index fell 0.8% to 3,052.93. Thailand’s SET rose 0.7%. India’s markets were closed for a holiday.

The week is full of potentially market-moving events, including US inflation data and the election, which could leave the US government divided between Democrats and Republicans.

For Tuesday, at least, “Look for markets to trade political headlines rather than substance,” SPI Asset Management’s Stephen Innes said in a comment.

Every seat in the US House of Representatives is up for election this year, along with about a third of the US Senate. At stake is control of both houses of Congress, currently under Democratic leadership.

Voters are also electing governors in most of the states this year. They will be in office in 2024 when the next presidential election takes place and could influence election laws or vote certification. Many state legislatures and local authorities are also on the ballot.

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A divided government is likely to bring gridlock rather than big, sweeping policy changes that could disrupt tax and spending plans. Historically, when a Democratic White House has shared power with a split or Republican Congress, stocks have seen stronger gains than usual.

On Monday, the benchmark S&P 500 rose 1% to 3,806.80 while the Dow Jones Industrial Average rose 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 elections could lead to increased spending to help the economy which could fuel inflation and force the Federal Reserve to continue raising interest rates to get prices under control.

It may take some time to get clarity 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 lower than September’s 8.2% inflation rate.

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

Higher rates put the brakes on the economy by making it more expensive to buy a home, car or anything else on credit, although it takes time to kick in. Rate hikes can bring on a recession, and they tend to drag down prices for stocks and other investments.

A fourth straight month of moderate inflation from June’s rate of 9.1% could afford the Federal Reserve room to loosen up a bit. The Fed has said it may soon reduce the size of its hikes to half a percentage point, after pushing through four straight three-quarter point mega hikes.

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

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Earnings reports also cause stock prices to fluctuate.

The summer earnings reporting season is about 85% done, and S&P 500 companies are on track to deliver growth of just over 2%. Analysts forecast a drop in S&P 500 profits for the final three months of the year, of nearly 1.5%. They predicted growth of 4% at the end of September.

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

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

The US dollar was unchanged at 146.63 yen. The euro fell to $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.

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