“While the outcome is much closer than expected, it is still consistent with policy gridlock,” said NAB’s head of markets economics, Tapas Strickland. “But perhaps not as much debt ceiling angst as previously with moderate Republicans able to have some influence as well, and US military support for Ukraine also looks like it will be less contested in a close Congress.”

With market sentiment not straying too far from movements in inflation and interest rates, Miller said all eyes would be on the October Consumer Price Index (CPI) data set to be released in the US overnight.

“Part of the earlier ebullient [shares performance] in global stock markets this week was the developing expectation that the Fed will lower its policy rate increment come December,” said Miller. “There’s been a lot of overblown commentary about pivots. I don’t think this inflation number will cause the Fed to pivot, but I do think it’ll probably give it room to maybe shave the policy increment to just 50 basis points.”

ANZ forecasted core CPI lifted 0.4 per cent month-over-month in October, compared to 0.6 per cent in September, predominantly due to weaknesses in good prices and plateauing in certain core service prices.

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Miller said the dip in the market today was likely a result of Australian investors “marking time” before CPI results came through, hoping it does not exceed the forecast of 0.6 per cent.

“If it’s higher than that, I think bond yields will start to sell off again, and that creates headwinds for equity markets,” said Miller. “It also probably leads to a re-escalation of fears around a recession. So, rising bond yields will be a headwind to valuations in terms of the price of the market, but it might also start to impact earnings.”

Locally, the Reserve Bank’s deputy governor Michele Bullock spoke at the ABE Annual Dinner on Wednesday evening. Notably, during the Q&A she said, “you could scorch the earth and get inflation back down very quickly – is that the right thing to do, or is it better to try and preserve some of the gains while you bring it back down?”

ANZ economist Madeline Dunk said this indicated the RBA is committed to easing inflation but maintained flexible targets. ANZ expects the RBA to take the cash rate to a restrictive 3.85 per cent next year.

Meanwhile, the bungled takeover of crypto company FTX.com by Binance, as well as the plunging value of bitcoin, acted as “canaries in the coal mine” for risk assets, said Miller. “You’ve got the eruptions happening in the crypto sector, which is probably having a negative feedback loop on investors’ desire for risky assets. They’re looking for safer assets.”

The local dollar also dropped overnight, falling from 0.65 to 0.64 US cents.

Tweet of the day:

Quote of the day: “As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com,” wrote crypto company Binance on its Twitter account a mere day after it announced the emergency takeover.

You may have missed: Elon Musk, chief executive of Tesla and Twitter, has offloaded $US3.95 billion worth of his electric car-making firm’s shares to help pay for his dramatic acquisition of the social media giant. The company’s shares have since dropped in value as investors fear Musk will continue offloading, and the business continues to battle supply chain shortages, rising raw material costs, and crippling inflation.

With Billie Eder, AP

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