Asian Stocks Retreat Ahead of the U.S. Midterms as the AI Trade Buckles — and Oil Steadies
The world's first verdict on Election Day came from the trading screens: Asia-Pacific shares fell 0.9 percent, Korean stocks dropped as much as 3.8 percent, and investors positioned for a Democratic House, a too-close-to-call Senate — and, in ING's words, 'the day ahead of a much bigger day.'
Stocks edged lower at the start of Asian trade on Tuesday and oil prices stabilized after the previous session's tumble, with investors on edge ahead of the start of voting in the U.S. midterm elections. MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.9 percent, led by a decline of as much as 3.8 percent in Korean shares, while Taiwanese shares fell as the AI trade buckled again — tech hardware suppliers sank, putting Taiwan's market on track to confirm a technical correction after losses of 13.3 percent from its record high in early October. Japanese markets were closed for a holiday, Australian shares rose 0.1 percent, and Hong Kong's Hang Seng was up 0.3 percent.
Wall Street handed Asia a soft lead: stocks edged lower overnight, the S&P 500 slipping 0.5 percent as technology earnings weighed on confidence even as data showed U.S. manufacturing activity picked up in October, and Apple shares fell 2.8 percent in after-hours trading. S&P 500 e-mini futures edged up 0.1 percent in Asian hours. The 10-year Treasury yield rose 2.1 basis points to 4.913 percent, and the dollar index edged up 0.1 percent to 101.81.
Underneath the moves is a single event, decided in Washington. Opinion polls favor the Democrats to win the House, though the Senate remains too close to call, and prediction markets Polymarket and Kalshi assign around a 75 percent probability that Democrats will control the Senate — pricing a likely Democratic sweep that Brazil's election surprise has just reminded traders can be mispriced. "Tuesday will be nothing more than the day ahead of a much bigger day," ING analysts wrote, noting that by tomorrow the market will have guidance on the midterm implications — and on the U.S. Treasury's quarterly refunding announcement.
For the capital region, the market's Election Day posture is a preview of the stakes: control of Congress sets the federal budget, the debt limit and the regulatory climate for the region's government-and-contracting economy. The screens will reprice all of it, starting tonight, on the voters' answer.
