Senate race still on a knife-edge but the Red Wave fails to materialise

Republican disappointment as blue senate seats are secured 

A red wave it is not. Republican hopes for a clean sweep of the House and Senate were dealt a severe blow as Democrat Senate candidate John Fetterman secured Pennsylvania, a key bellwether for the presidential election in two years. Other Senate battleground seats remain too close to call as of send time, but the GOP is on course to secure the House of Representatives. The Republicans can still take control of the Senate by winning Georgia and Nevada; the former could yet go to a run-off if neither candidate gets 50%. Remember, the Senate is currently 50-50 and the Democrats only have control by virtue of the Vice-President's casting vote. Trump-backed JD Vance took Ohio.  

Still, it’s a good night for the Republicans but it’s not the big wave they’d hoped for. Against this, and in a possible blow for Donald Trump, the success for DeSantis in Florida underlines his credentials to run for the White House.  

Mixed market performance on the heels of political uncertainty  

The dollar trades a bit weaker this morning with Treasury yields a tad lower, with the benchmark 10yr at 4.1%. The dollar index trades near 109.40 after a sharp move to the downside yesterday afternoon. European stock markets are a bit lower in early trading after a downbeat Asian session. Wall Street rallied for a third straight day with the Dow up another 1%. The market seems to be hoping for gridlock to reduce government’s ability to either cut taxes or increase spending, which will help tighten fiscal conditions such that the Fed probably has to do a little bit less to control inflation. As I said though, everyone thinks just about any likely outcome from the election is bullish so good luck…feel like good chance of bear market rally extension towards 4,100 for spoos ahead of the Fed meeting in Dec on expected/hoped for dovishness. The S&P 500 rallied half a percent and is up about 7% from the October lows. CPI is out tomorrow and that is the big one for judging what the Fed might be thinking as the lag effect of jumbo hikes catches up or doesn’t. 

Ramping covid stalls Chinese industrial performance 

Cases of Covid in the manufacturing hub of Zhengzhou are rising, meaning the lockdown affecting the world’s largest iPhone assembly line is likely to be extended. China’s producer price index declined by 1.3% in October after rising 0.9% in September.  

EarthX: Musk’s assets continue to nosedive under questionable management 

Tesla declined again to $191 with further losses after-hours as Elon Musk revealed he’d dumped almost $4bn in stock. It means he has sold down $20bn of TSLA since he announced the $44bn acquisition of Twitter. As noted consistently here, Tesla shares were always going to come under pressure as Musk used his stock to fund the purchase. Tesla shares are now down more than 52% YTD.  

Crypto winter continues as investor interest wanes 

We’ve not talked about crypto much lately, but things are getting interesting again. The crunch at FTX has left the broader crypto space under pressure, with the near collapse of the exchange sending Bitcoin down double-digit percentages to $16,800 last night before a sharp reversal to sit around the $18k level this morning. FTX has slumped from a valuation of $32bn earlier this year to be worth nada...Ponzi schemes are going to do this. Facing a severe liquidity crunch – a run on its assets – chief rival Binance stepped in. To be fair, this was probably the top.