Five Things You Need to Know to Start Your Day

Written by
Lorcan Roche Kelly
Written by

Lorcan Roche Kelly

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(Bloomberg) --

Midterm election results bang in line with consensus, markets calm as legislative gridlock looms, and there's no end in sight for the trade war. Here are some of the things people in markets are talking about today.

Democrats and Republicans win

The U.S. midterm election results are in line with market expectations: Democrats will control the House from January, while Republicans maintain their majority in the Senate. There will be a record number of women in the House, with the first female Muslim and Native American representatives elected. Looking forward to 2020, one trend that might worry GOP strategists is the party's under-performance in the Midwestern and Rust Belt states that handed President Donald Trump his victory in 2016.

Now what?

The most likely outcome from the election will be legislative gridlock in Washington. Donald Trump will find some of his signature campaign promises, such as the construction of a border wall with Mexico, are now in doubt. The president and his staff are also likely to face House investigations on personal finances and conduct. Market reaction has been muted, as investors welcome the predicted result, and put political worries to the back of their minds, at least for now.

No end to trade war

One thing that isn't going to change, according to Gary Cohn, formerly President Donald Trump's top economic adviser, is the U.S.-China stand-off. When asked at Bloomberg's New Economy Forum in Singapore why the president was so focused on trade, Cohn said Trump had found “one economist on Amazon who thinks trade deficits matter, and he listens to him.” Speaking at the same event, BlackRock Inc. Chief Executive Officer Larry Fink warned that the U.S. should not be picking fights with its creditors as the fiscal deficit grows, adding that the Treasury may run into a “supply problem.”

Markets rise

Overnight, the MSCI Asia Pacific Index added 0.2 percent while Japan's Topix index closed 0.4 percent lower as the dollar weakened against the yen in the wake of the election results. In Europe, the Stoxx 600 Index was 1.2 percent higher at 5:45 a.m. Eastern Time, with a Spanish Supreme Court decision boosting the country's banks. S&P 500 futures pointed to a gain at the open, the 10-year Treasury yield slipped to 3.184 percent and gold rose.

Coming up…

Oil, in line for its longest losing streak since 2014, may not get much good news from the EIA inventory report due at 10:30 a.m. The continuing drop in prices is becoming a concern for OPEC and its allies, with the alliance now talking about reversing course and cutting production when they meet in Abu Dhabi this weekend. The Treasury will sell $19 billion of 30-year bonds at 1:00 p.m. The Federal Reserve's two-day meeting begins today, while the European Central Bank holds a secret ballot to select the next head of banking supervision. Qualcomm Inc., Twenty-First Century Fox Inc., and Square Inc. are among the companies reporting earnings.