Market Talks covering the impact of U.S. Politics and White House policies on companies and markets. Published exclusively on Dow Jones Newswires throughout the day.
0302 ET - It is still too early to conclude if this is the start of a bear market, after Wall Street's sharp overnight losses, Saxo Markets' Charu Chanana says in a commentary. Such market declines often reflect fear, forced liquidations and deteriorating sentiment, says the chief investment strategist. While the selling has spread more broadly, the immediate shock is concentrated around the artificial intelligence investment cycle, regulatory uncertainty and crowded positioning. The bigger concern is whether the weakness extends into corporate earnings, credit conditions, employment and economic growth. Still, extreme selling can create conditions for a market rebound. "Once that selling pressure eases, markets can rebound quickly, sometimes before there is much improvement in the economic news," she adds. (amanda.lee@wsj.com)
0245 ET - Vestas Wind Systems is set to benefit after Democrats won control of the U.S. Congress, J.P. Morgan analysts write. While there is some concern that a slowdown in data center buildout could temper power demand, this is unlikely to hurt wind companies, they say. "The driver for renewable energy growth will be the shift to clean energy as climate friendly policies will likely emerge," they add. (adam.whittaker@wsj.com)
0112 ET - The Democrats' clear election victory is fueling expectations for stricter regulation of AI and the construction of data centers, but a genuine shift in the direction of U.S. AI policy appears rather unlikely, ICM Investmentbank's Michael Klawitter says in a note. "Consequently, the 'hyperscalers' are expected to stick to their current investment plans for the time being," the chief economist and portfolio manager says. Hyperscalers contribute significantly to the supply of duration, and given this issuance dynamic, U.S. technology giants have emerged over the past two years as a distinct group of issuers within the investment-grade segment--one for which the standard market correlations between credit ratings and spreads apply only to a limited extent, he says. (emese.bartha@wsj.com)
0659 ET - The cost of protecting euro credit against default falls as sentiment improves following this week's U.S. midterm elections. "There was relief among investors that the results weren't disputed, which helped to reduce political uncertainty," Deutsche Bank Research strategists say in a note. The iTraxx Europe Crossover index of euro high-yield credit default swaps falls 5 basis points to last trade at 303bps, S&P Global Market Intelligence data show. (miriam.mukuru@wsj.com)
0459 ET - Long-term allocators to bitcoin, including pension funds, should not alter their approach as Congress switches from Republican to Democrat, Cartwright's investment consulting director Sam Roberts says. "Supportive U.S. legislation helps at the margin, but it should not be the trigger to review strategy," he says. Roberts adds that the congressional switch makes the growing U.S. fiscal deficit even harder to change course, potentially making a case for scarce assets such as gold and bitcoin. Bitcoin is 0.1% higher at $80,253. (joseph.wilkins@wsj.com)
0454 ET - The U.S. midterms raises questions about foreign policy, but the strategic stalemate with China seems unlikely to budge until Trump is gone, says Arthur Kroeber at Gavekal Research. Beijing's control of rare earths makes it more or less impossible for Trump to escalate tariffs or export curbs beyond a likely round of levies under the Section 301 probe of excess capacity, which Beijing has signaled it will tolerate, Kroeber says. China's Xi will be quick to retaliate against any escalation but has made clear his desire for "constructive strategic stability"--at least for another year as he prepares for the Communist Party's 21st Party Congress next autumn, Kroeber adds. A truce also allows time to prepare for whatever China strategy the next U.S. administration might bring. (fabiana.negrinochoa@wsj.com)
0426 ET - The Democratic landslide in the U.S. midterms will change a lot in American governance, but not China policy--at least not in the short run, says Arthur Kroeber at Gavekal Research. Beijing and Washington's uneasy stalemate should persist, probably until the end of Trump's term. China lies far down Democrats' priority list, behind items such as inflation, AI regulation and the Iran war. "The party has no clear stance on China," divided by differing views of containment versus cooperation. "The Democrats will likely spend the next two years figuring out what China policy they want if they retake the White House, not trying to force big adjustments now." (fabiana.negrinochoa@wsj.com)
0411 ET - The medium- to long-term outlook for U.S. AI data centers likely involves builders offering more safeguards, local investments, and contractual commitments including electricity-bill protection, says Malik Ahmed Khan, senior equity analyst from Morningstar. Anthropic, with its focus on building AI for humanity and its high-profile spat with the DoW, may benefit from increased AI regulation under Democrats. The analyst doesn't expect any near-term impact on Anthropic's IPO, but says the dynamic warrants monitoring the next couple of years. (jiahui.huang@wsj.com; @ivy_jiahuihuang)
0408 ET - Shares of European defense companies are in decline after a mixed set of quarterly results and midterm election results that cast doubt on the extent of U.S. military spending going forward. Investors are concerned that Democrats' win of majorities in both chambers of Congress could jeopardize defense bills from which European contractors can also benefit through contracts to supply the U.S. armed forces. In Germany, Rheinmetall shares are down 17% after a second guidance downgrade, with Renk Group shares down 6% and Hensoldt's down 2%. France's Thales is down 0.9%. In Italy, Leonardo shares are down 2.8% even though the company raised its annual order guidance for the second time. The U.K.'s BAE Systems sheds 3%. (mauro.orru@wsj.com)
0402 ET - Bitcoin sentiment has shifted significantly since the U.S. midterms, says Derive.xyz. founder and CEO Nick Forster. "Election night was a textbook case of markets selling the uncertainty and buying the outcome," he says. Derive traders now price in a 55% chance of Bitcoin finishing above $80,000 Friday, versus 5% at its overnight low, and roughly 10% odds of falling below $78,000. The probability of Bitcoin exceeding $100,000 by Christmas rises to 5% from 3.5%, Forster notes. "Traders were paying a premium for protection ahead of the election, but once the results became clear, much of that demand disappeared." The question now is whether it can sustain its recovery once the short covering and hedge unwinding have finished, Forster says. Bitcoin last trades at $80,458. (fabiana.negrinochoa@wsj.com)
0354 ET - U.S. midterms have rippled across markets, but for Asian bonds, oil and the Fed matter more than the political arithmetic in Congress, says Rong Ren Goh at Eastspring Investments. "A durable decline in energy prices could ease inflation pressures, restore some flexibility to Fed policy and provide a powerful tailwind for Asian duration markets," he says. Conversely, another energy shock could keep U.S. yields elevated, pressure Asian currencies and introduce more vulnerabilities in regional credit markets. Rather than positioning solely for a divided U.S. government, Goh says Asian fixed-income investors should focus on the trajectory of energy prices, U.S. monetary policy and global risk sentiment. "The biggest market moves may come from what Trump does next." (fabiana.negrinochoa@wsj.com)
0342 ET - Oil prices hold near a two-month low after tumbling more than 8% in the previous session on hopes that a Democratic sweep in the U.S. midterm elections could accelerate efforts to end the Iran war. Brent crude is up 0.5% to $95.07 a barrel, while WTI futures tick 0.1% lower at $88.02 a barrel. The elections' outcome could bring greater scrutiny of the conflict and make funding the conflict more difficult, while also prompting opposition from within the Republican Party. Senate Democratic leader Chuck Schumer said Wednesday his party would seek to end the war, citing Congress's control over federal spending. Vice President JD Vance publicly blamed the conflict for Republican losses. However, "how all this plays out is still highly uncertain," analysts at ING say. "The degree and speed to which the oil market has sold off seems to be overdone."
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