The Wednesday Market Minute

  • Global stocks build gains as polls project that Democrats will take control of the House of Representatives for the first time since 2010 while Republicans extend their Senate majority.
  • U.S. dollar slides in overnight trading as "split" Congress suggests some of President Donald Trump's expansionary fiscal policies could be shut down by rival lawmakers.
  • Asia stocks book modest gains as investors digest a result that was largely forecast by pollsters, but questions over trade, tariffs and stimulus linger for international investors.
  • Global oil prices reversed their multi-day slump as the dollar declined, even as traders focus on rising U.S. supplies and near-record output over sanctions on the sale of Iranian crude.
  • U.S. equity futures point to modest post-election gains on Wall Street, with the Dow called 200 points higher ahead of earnings from 21st Century Fox, Humana, Marathon Oil and Qualcomm.

Market Snapshot

Global stocks traded firmly higher Wednesday, while the U.S. dollar slid and Treasury bond yields retreated, as investors reacted to projections that suggest Democratic lawmakers will take back control of House of Representatives for the first since since 2010, potentially frustrating key economic initiatives from President Donald Trump.

With polls only recently closed in California, analysts are projecting an 11-seat House majority for the Democrats, who look to have ridden a wave of voter dissatisfaction with the President, despite his record on jobs, the economy and the broader financial markets, as healthcare topped the list of voters' concerns.

Republicans are likely to maintain, or possibly extend, their Senate majority, exit polls indicate, creating a so-called "split" congress that typically skews S&P 500 returns over the next to years towards the lower end of historical post-election averages. 

"Thanks to you, tomorrow will be a new day in America," Democratic House leader Nancy Pelosi told supporters Washington as the numbers rolled in. "We will have a Congress that is open, transparent and accountable to the American people."

Early indications from U.S. equity futures suggest traders were sanguine with the projected results, given that a split was largely predicted by pollsters, with contracts tied to the Dow Jones Industrial Average indicating a 200-point opening bell gain while those linked to the S&P 500 guiding to a 25-point advance for the broader benchmark. Nasdaq Composite futures suggest a 100-point gain for the tech-focused index.

Twilio Inc. (TWLO) shares surged in pre-market trading after the cloud communications group topped Wall Street's third quarter earnings forecast and boosted its sale guidance following its $2 billion takeover of email technology company SendGrid Inc. (SEND) .

Twilio shares were marked 14% higher in pre-market trading Wednesday, indicating an opening bell rice of $81 each, a move that would extend the stock's year-to-date gain past 200% and value the San Francisco, Calif.-based group at nearly $8 billion.

European stocks bumped solidly higher at the opening bell, with the Stoxx 600 rising 1% by mid-day in Frankfurt, led by big gains for regional bank stocks, especially in Spain, after the country's Supreme Court reversed a government ruling that would have forced them pay billions in back taxes linked to house purchases. 

Adidas AG (ADDYY) shares were an early mover of note, falling 2.2% to the bottom of the German DAX Wednesday after the sportswear giant trimmed it full year revenue outlook after disappointing third quarter sales in its key European market as rivals Nike (NKE) and Puma (PUMSY) continue to challenge its home court dominance.

Adidas said operating earnings for the three months ending in September jumped 19% from the same period last year to €656 million ($752 million), topping analysts' forecasts, as rose 8% to €5.87 billion. However, Adidas said full year sales would rise between 8% and 9%, a reduction from the previous 10% forecast, even as it guided for better-than-expected earnings growth of as much as 20%, a move that would take its 2018 bottom line to as high as €1.72 billion.

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.63% lower on the session at 95.72 as international investors bet the new House majority would seek to block portions of Trump's economic agenda, including some of his more aggressive efforts to reduce the nation's trade deficit and plans fora  middle-class tax cut. 

Government bond yields, a key metric for equity investors concerned that faster rate hikes from the U.S. Federal Reserve will snuff out stock gains next year, eased in overnight trading as well, with benchmark 10-year notes falling to 3.18% despite Treasury sales of around $83 billion in new debt hitting the market this week.

The dollar's pullback, coupled with extended declines for global oil prices, which fell past a seven month low in overnight trading, provided support for energy importing markets in Asia, but pushed the Nikkei 225 in Japan, where export stocks are sensitive to any rise in the yen, to a 0.28% decline as the benchmark closed at 22,085.80 points.

China stocks, however, were weaker across the board, with the Shanghai Composite falling 0.56% and the Hang Seng slipping 0.31% as investors assumed a Democratic House may support some of the President's hardline stances on U.S.-China trade. 

Global oil prices reversed their multi-day slide as the dollar slumped, even as investors focused on private data from the American Petroleum Institute that showed domestic crude stockpiles rose by 7.2 million to 432 million barrels, reinforcing bets that near-record collective output of around 33 million barrels each day from Saudi Arabia, Russia and the United States will more than offset sanctions on the sale of Iranian crude.

Brent crude contracts for January delivery, the global benchmark, were seen $1.22 higher from their Tuesday close in New York and changing hands at $73.35 per barrel, trimming their fourth quarter decline to around 15%, while WTI contracts for December, which are more tightly liked to U.S gas prices, were marked 80 cents lower at $63.01 per barrel.