Midterm counts weigh on markets as rates edge higher

Midterms meet the market

The American midterm elections dominated the overnight tape. On Tuesday, before the polls had closed, Treasury yields rose as markets waited for results, according to the Wall Street Journal. European government bond yields rose with them.

As the counts came in, the mood turned. Sky News reported that Wall Street fell as the results emerged, with Democrats gaining early momentum, and noted that the implications could be broad. By the early hours of Wednesday the Journal's live coverage had US stock futures edging lower as investors weighed Democratic gains. Oil prices fell as the results unfolded, the paper said in a separate report.

The selling travelled east. City A.M.'s morning live blog said a tech sell-off had hit Asia after the midterms, and that FTSE 100 stocks were expected to drop when London opened.

Not all of the attention lay on Congress. On Monday evening the Journal had argued that America's multi-trillion-dollar AI buildout was itself on the ballot, setting out the risks that state and local elections pose for Wall Street and for the AI trade. The connection matters because so much of this year's market leadership has rested on that spending. On Tuesday evening the paper opened a live question-and-answer session for readers on the results, which were still arriving as London slept.

Rates point upward

Away from Washington, the direction of borrowing costs was mostly up. Australia raised interest rates to an 18-year high to fight inflation, CNBC reported on Tuesday.

In London, City A.M.'s Shadow Monetary Policy Committee urged the Bank of England to raise rates. The BBC published an explainer on what is happening to UK interest rates and what it means for mortgages.

Property markets are feeling the change. In Hong Kong, the South China Morning Post reported that private home sales had dropped, with buyers taking a wait-and-see approach as rates are tipped to rise. In Britain, City A.M. said investors were urging the estate agent Foxtons to face up to a slump in the property market.

Price pressures extend well beyond mortgages. The Journal described health insurance as the sleeper inflation issue in America. In Britain, This is Money reported that the cost of employing young people has risen at three times the rate of inflation under Labour, a rise it linked to a slump in jobs. Several employers announced cuts on Tuesday. Virgin Media O2 said it would shed thousands of jobs to reduce costs, according to Sky News, and City A.M. reported layoffs at London-listed Knights following a recent acquisition. Primark, its profits sliding, brought forward its home deliveries plan by two years, the Guardian said.

On pensions, the Guardian reported that guaranteed retirement income was being resurrected for 17 million private sector workers. Pension providers questioned the plan, City A.M. reported, describing their preference for a safety net rather than a straitjacket.

AI, Anthropic and the nervous

Anthropic's planned stock market debut remains the largest single story in technology. This is Money said UK investors are set to be offered shares, but could face a SpaceX-style scramble. The Journal reported that existing investors are pushing for a more cautious valuation, closer to $1.5 trillion. Euronews added that the company has swung back to an operating loss, with an $895 billion compute bill looming over the listing. The Post, for its part, examined why Chinese AI companies such as Z.ai and MiniMax struggle to match Anthropic's profit margin.

Apple's earnings beat expectations, Euronews said, though rising chip costs worried investors. The Journal reported Apple shares slipping and Meta's debt costs rising.

The warnings have grown louder. Hedge fund Elliott cautioned against what it called FOGO, the fear of getting obliterated, in place of the more familiar fear of missing out, as worries over a stock market crash mounted. In This is Money, Maggie Pagano wrote that Singer had set bear market alarm bells ringing on Wall Street, and that it was time to listen. Goldman Sachs took the other side, speaking of enormous opportunities even as global AI sell-offs rattled investors.

China offered its own version. Beijing has reined in a rush of listings after AI concerns hit the stock market, the Journal reported. The Post said Chinese investors were staying on the sidelines even as state intervention gathered pace, and that Chinese firms' third-quarter dividend growth lagged the global average. Julius Baer's chief executive told the paper that Asia would drive the bank's growth as investors diversify amid US AI risks.