ASX futures were 49 points or 0.7 per cent lower at 6948 at 7am on Thursday, which suggested a weaker start.

Stocks on Wall Street were lower on Wednesday, and major indexes were on track to halt a three-day rally, as investors awaited the results of midterm elections to see whether Republicans would retain control of one or both chambers of Congress.

With votes still being counted across the United States as of 3:00 p.m. ET on Wednesday afternoon, many critical midterm election races remained up in the air. Republicans are still favored to win the House majority, but control of the Senate is up in the air. Some races could eventually take days to determine.

Investors are watching the results to see if the election results in a divided U.S. government, which would imply few sweeping policy changes in the next two years. That is often taken as a gift to the stock market.

While investors still believe in a government deadlocked by gridlock, early returns indicate that Republicans might not have gained as much as people might have thought they would.

“Markets do not like surprises; they like predictability. What we didn’t have is the journey expected,” said Aoifinn Devitt, chief investment officer at investment adviser Moneta.

In commodities, oil fell 2.93 per cent to $US92.57 a barrel, gold fell 0.5% to US$1,703.68.

On bond markets, the yield on Australian 2 Year government bonds also eased by five points to 3.29% and the yield on Australian 10 Year bonds eased by two points to 3.86%. Abroad, 2 Year US Treasury notes yielded 4.63% and 10 Year US Treasury notes yielded 4.16%.

The Australian dollar has slipped to 64.21 US cents, against the prior close of 65.05. The Wall Street Journal Dollar Index, which measures the U.S. currency against 16 others, ticked up to 102.84.

Asia

Chinese stocks slumped, closing lower and pulling back from a recent rally as investors recalibrated expectations around China loosening its strict pandemic restrictions. New infections in Beijing climbed to the highest level in more than five months, and new cases in the country overall also soared to a multi month high. Chip makers and liquor producers were among the biggest losers. NAURA Technology Group fell 3.4%, while index heavyweight Kweichow Moutai lost 1.7%. The only real bright spot in the market was the property sector. Shares of Gemdale Corp. gained 7.0% and Poly Developments & Holdings Group added 2.5%, following Beijing’s statement that it would support wider debt financing for private developers. The Shenzhen Composite Index fell 0.4% and the ChiNext Price Index 1.4%.

The Hang Seng index fell in Hong Kong, where the market was pulling back from a soaring start of the month. The Hang Seng Index slipped 1.2% to close at 16358.52. Losses were led by Chinese automakers, after the latest vehicle insurance sales data, a closely watched industry metric that serves as a proxy for overall auto demand trends, came in below the level expected for the first week of November and as of Tuesday official data also showed a decrease in national October auto retail sales. Geely Auto fell 6.0% and BYD dropped 4.6%. Property developers turned some of the market’s losses around, after China indicated that it would provide more policy and financing support. Country Garden leapt 14% and Longfor advanced 4.0%.

The Nikkei Stock Average ended down 0.6% at 27716.43 after data showed Japan’s current account surplus shrank in the first half of the fiscal year. Energy issues were among the biggest decliners as Cosmo Energy lost 1.7%, Idemitsu Kosan fell 2.7%, and Nichireki retreated 1.8%. Game developer Nintendo declined 7.1% after it cut its FY outlook for Switch console sales on chip woes. Suzuki Motor rose 3.5% after it lifted its FY earnings outlook on stronger 1H earnings.

Europe

European markets drop after Asia has mixed days mostly in the red. The pan-European Stoxx Europe 600, as well as the French CAC 40 and DAX in Germany, all fell 0.5%, 0.4% and 0.6%.

"As results continue to trickle in from the US midterm election, it seems that the Democrats are doing better than feared, keeping some key Senate seats and President Joe Biden dodging an embarrassing Republican whitewash," Interactive Investor head of investment Victoria Scholar said in a note.

The FTSE 100 in London ended the day down 0.1 percent on Wednesday, in a mixed day of trading that was a relatively flat performance overall compared with more significant drops in other markets. As midterm elections in the US do not yet provide investors a clear direction, and with the all-important US inflation reading still to come this week, most traders are going for some quiet, cautious optimism, said Chris Beauchamp, chief market analyst at IG Group PLC. “Both the buyers and sellers are feeling exhausted after October and the beginning of November, typically busy weeks,” Beauchamp added.

North America

Stocks fell in the US on Wednesday in one of the worst trading days of the fall, with major indexes on track to end a three-day rally even as investors looked to midterm election results to see if Republicans would win control of one or both chambers of Congress.

Votes are still being counted across the US in midterm elections, and a number of key races remain too close to call early Wednesday. And while Republicans remain in the pole position to win the House majority, the Senate is up for grabs. It is possible that some races will take days to call.

Investors are awaiting the outcome to determine whether the election results in a divided US government, a scenario signaling few major policy changes in the next two years. That is usually considered a positive for the stock market.

And while investors’ bets on a divided government remain in place, the counts have so far suggested that Republicans may not have made all the strides that had been expected.

“Markets don’t like surprises, they like predictability. This was not the path people were expecting," said Aoifinn Devitt, chief investment officer at investment adviser Moneta.

Overall, history has shown that stocks usually climb following midterms. The S&P 500 has gained in the trading session following Election Day about three-quarters of the time dating back to 1930, with an average advance of 0.4%, according to Dow Jones Market Data. The broad benchmark has gained ground in the one-year period following every midterm election since 1942.

Regardless, many maintain that their attention is elsewhere this year as the Federal Reserve pushes interest rates higher at a rapid clip to try to cool continued inflation.

“Ultimately, it’s still going to be about the Fed,” said Leslie Thompson, the chief investment officer at Spectrum Wealth Management. Ms. Thompson said her firm is defensively positioned and sitting on more cash than normal as it tracks the Fed’s monetary policy trajectory.

Also on Thursday, fresh inflation numbers for October are likely to weigh heavily on the Fed’s next interest-rate decision. Economists estimate that consumer prices increased 7.9 percent from a year ago, down from 8.2 percent the previous month.

Investors are about evenly divided over what the central bank will announce at its meeting this month. Federal-fund futures, which track traders’ bets on the future path of interest rates, on Wednesday indicated a 52% probability that the Fed will raise rates by a gentler 0.5 percentage point, as opposed to 48% odds of boosting by 0.75 percentage point for a fifth installment in a row.

Investors also remain on edge for any potential contagion effects stemming from a selloff in cryptocurrencies that was set off after crypto exchange FTX caved in Tuesday to a sudden liquidity crunch and said it would be acquired by rival Binance. Bitcoin dropped about 11% from its 5 p.m. ET Tuesday level to sit at $16,568. Ethereum was down about 14 percent from its 5 p.m. ET price.

For its part, FTX’s FTT token had been in a grim slide as well. It is down about 63% over the past 24 hours, CoinDesk data reveals, as the fallout from its liquidity crisis piles up.

Shares linked to cryptocurrencies also fell. Shares of cryptocurrency exchange rival Coinbase Global dropped 10%. Robinhood Markets dropped 12 percent. Earlier this year, Sam Bankman-Fried, the head of FTX, announced a roughly $648 million investment in Robinhood that gives him 7.6% of the company’s Class A shares. He said in an interview earlier this year that FTX was open to working with Robinhood.

The liquidity problems at FTX and the ripple effects in the crypto market “could be affecting risk appetite” for investors on Wednesday, said Ross Mayfield, investment strategy analyst at Baird. “It’s going to keep the market on edge of what’s next out there, if the Fed is going to continue this line of tightening right now.”

Elsewhere, Meta Platforms climbed 6.1% after it announced it would eliminate over 11,000 workers, or 13%, of the workforce. Walt Disney fell 13% after its quarterly results fell short of expectations, leading the Dow industrials lower.