US stock futures, Treasury yields and the dollar dipped on Wednesday as Democrat Doug Jones beat Republican Roy Moore in a bitter US Senate race in Alabama, while Asian shares gained as crude oil futures took back some lost ground.
European stock futures suggested a subdued opening for the region, FTSE futures nearly flat and CAC futures 0.1 per cent lower. Jones' victory could mean trouble for President Donald Trump and his populist political base. It narrows the Republicans' already slim majority in the US Senate, possibly making it harder for Trump to advance his policy agenda.
“The US dollar is on the backfoot after Jones has scored an upset victory over Moore in the Republican stronghold of Alabama, and the implications are that it shrinks the Republican's Senate majority from 51 to 49,” said Sue Trinh, head of Asia foreign-exchange strategy at RBC Capital Markets in Hong Kong.
“The big issue now is, whether Republicans will push through their tax Bill before Christmas,” she said. “And more broadly, US dollar bulls will be more worried that this marks a Democratic revival into 2018 mid-term Congressional elections.”
Fed rate hike
The election temporarily seized the spotlight away from the Federal Reserve, which is widely expected to raise interest rates later on Wednesday and could provide clues about the timing of future US policy moves. S&P e-mini futures were down as much as 0.3 per cent after the election outcome. They were last down 0.1 per cent.
The dollar index, which tracks the greenback against a basket of six major rival currencies, was down 0.2 per cent at 93.959 pulling away a high of 94.219 touched on Tuesday, which was its highest since November 14. The dollar slumped 0.2 per cent to 113.38 yen, while the euro rose 0.1 per cent to $1.1755.
“Heading into tonight, this reaction could be an opportunity for people to pick up some dollars ahead of the Fed meeting," said Bart Wakabayashi, branch manager for State Street Bank in Tokyo.
Treasury yield
The 10-year Treasury yield stood at 2.401 per cent after falling to a session low of 2.389 per cent, compared to its US close on Tuesday of 2.403 per cent. MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.5 per cent, while South Korean shares gained 0.8 per cent.
Japan's Nikkei stock index finished 0.5 per cent lower, pressured by the stronger yen and shrugging off upbeat economic data that showed Japanese core machinery orders rose a more-than-expected 5 per cent in October. On Wall Street on Tuesday, the Dow Jones Industrial Average and the S&P 500 both notched record closing highs, though the Nasdaq Composite shed 0.19 per cent. Bitcoin was down 0.9 per cent on the Bitstamp exchange at $16,510.34.
Fed policy outcome
The Fed will conclude its two-day policy meeting and is seen raising its benchmark rate to between 1.25 and 1.50 per cent, with investors also focusing on clues to the pace of tightening next year. Concerns that the central bank would take a slower pace of tightening due to cool inflation were partly alleviated by data on Tuesday that showed US wholesale inflation rose last month. Consumer price index (CPI) data will be released later in the global session on Wednesday.
The Bank of England and the European Central Bank will also meet this week and are expected to hold rates steady.
Crude oil futures took back lost ground after facing profit-taking following their surge to two-year highs in the previous session on an unplanned closure of the pipeline that carries the largest volume of North Sea crude oil. Brent crude added 0.8 per cent or 51 cents, to $63.85 a barrel, after shedding 2 per cent on Tuesday. US crude added 0.7 per cent, or 38 cents, to $57.52, after slipping 1.4 per cent overnight.