European Midday Briefing: Stocks Fall on Investor Caution Ahead of Midterms

MARKET WRAPS

Stocks:

Shares fell Tuesday with European semiconductor companies declining after a selloff of stocks exposed to AI, and investor caution ahead of the U.S. midterm elections.

Oil turned higher after the U.S. attacked Iran's Qeshm Island on Monday and uncertainty over the midterms kept investors cautious.

America's Gulf allies are steeling themselves for a heavy U.S. bombardment of Iran that they expect to trigger a vicious cycle of retaliation against them after the midterms-and as early as this week. Odds of a Democratic sweep have increased, and Swissquote called the vote a key test for oil prices.

If Democrats gain control of one or both chambers, they could increase scrutiny of war policy, challenge military funding and increase pressure for a diplomatic solution once the new Congress is formed.

"Markets, however, could anticipate that pressure immediately."

However, a weaker Republican position wouldn't automatically mean a lower geopolitical risk premium, even if it adds pressure for a diplomatic resolution.

If Republicans retain control of Congress, the geopolitical stalemate in the Middle East could persist, and the end of the election campaign could reduce the political urgency to bring energy prices down.

Swissquote said that could drive up U.S. petrol prices in the short run, and on the monetary front, higher energy prices would strengthen the case for further rate hikes by the Fed and other major central banks.

Commerzbank said Democratic control of Congress should-on balance-be Treasury positive, however it added that "Predicting the election outcome is one thing; anticipating Donald Trump's and the market's reaction is another."

U.S. Markets:

Stock futures were mostly lower across the board as Americans prepared to go to the polls today.

Earnings from Pfizer, Apollo Global Management, Shopify, Yum! Brands, ADM, Marathon Petroleum are expected this morning.

Forex:

The euro was stronger against a weaker dollar, but ING said the euro could struggle to recover more meaningfully as oil prices remained elevated and French fiscal concerns lingered.

French government bonds failed to benefit from lower oil prices on Monday, suggesting spreads between 10-year French and German bond yields looked set to remain above 150 basis points.

"It therefore remains hard for the euro to shake out the lingering risk premium, and much more tangible progress is needed for oil to trade sustainably lower from here."

The DXY dollar index fell.

The prospect of a Democratic sweep in the midterms could put some pressure on the currency, according to ING.

"Fears of tougher regulation could weigh on AI stocks (we've recently seen how that can hit the dollar), while markets could price in greater risks of decision-making gridlock around issues such as government funding and the debt ceiling."

The Swiss franc rose to a five-month high against the euro and seven-week high versus the dollar after data showed inflation there accelerated sharply in October.

Bonds:

Eurozone government bond yields rose, tracking Treasury yields higher, as oil prices rebounded slightly from Monday's slide.

The difficult environment for bonds was likely to persist for a while but yield levels were too high, Mediolanum International Funds said, adding that it was constructive on government debt at current elevated yield levels.

The outlook for credit, meanwhile, will depend on whether monetary authorities react too slowly, it added.

"The longer higher yields persist, the more stress credit sectors will feel."

Ninety One said government bonds looked favorable given their high yields and attractive pricing. Gilt yields climbed as the market became more cautious ahead of the midterms and awaited the BOE's interest-rate decision due on Thursday.

Energy:

Oil prices rose, recovering some of the previous session's steep losses as investors weighed fresh U.S. strikes on Iran against continuing diplomatic efforts to end the conflict.

Gas

European natural-gas prices rebounded after settling more than 8% lower in the previous session.

Metals:

Gold fell more than 1.5% as a rebound in oil prices fueled expectations of higher interest rates.

Aluminum Supply

The capacity ramp up in the Middle East is expected to slow, Jeffries said, due to tough smelter economics there, particularly given the high cost of alumina imports.

EMEA HEADLINES

Bayer Shares Jump After Pharma Recovery Prompts Outlook Raise

Bayer shares rose after the German group raised its full-year earnings guidance, citing a recovery in its pharmaceutical business that allowed it to mitigate market pressures at its agricultural and consumer-health divisions.

Shares in Bayer were up 5.6% in European morning trading Tuesday, adding to recent gains that have led the stock to roughly double its value over the past year.

Saudi Aramco Profit Surges, Offering Some Relief to Kingdom's Finances

State-owned energy giant Saudi Aramco reported a rise in third-quarter profit, offering some relief to the kingdom's finances during a period of escalating conflict with Yemen's Houthi militants.

The company's net profit rose 35% to $36.25 billion from $26.9 billion in the same period a year earlier, Aramco said Tuesday. It attributed the boost to higher crude volumes sold from maintaining consistent production, as well as higher prices of refined and chemical products.

Lufthansa Posts Higher Profit Despite Increase in Fuel Costs

Deutsche Lufthansa reported an increase in third-quarter net profit, after strong demand and cost discipline outweighed higher fuel prices.

The German carrier group said it made a net profit of 1.26 billion euros ($1.41 billion) for the quarter compared with 966 million euros the same period a year prior. Higher fuel prices added 543 million euros in costs, but the company said it was able to offset this through savings and higher revenue.

Philips Shares Rise After Stronger Profitability Revives Confidence

Shares in Royal Philips rose after the Dutch health-technology company reported stronger profitability in the third quarter, driven by robust sales across the business.

Philips said its margin for adjusted earnings before interest, taxes, and amortization rose by 0.7 percentage point on year to 13%, with higher sales, gross margins and productivity efforts helping offset cost inflation.

Schaeffler to Cut Further 3,460 Jobs in Europe as Auto Industry Deteriorates

Schaeffler said it would cut a further 3,460 jobs in Europe, representing around 3.2% of its global workforce, as part of fresh plans to cut costs as the automotive industry downturn intensifies.

The German auto industry supplier said Tuesday that the environment is persistently challenging, with the overall market deteriorating and competition intensifying. Demand for internal-combustion-engine vehicles has weakened while the switch to electric vehicles has been delayed, it said.

GLOBAL NEWS

U.S. Treasury Yields Rise as Markets Await Midterm Election Results

Treasury yields rose in early European trade as U.S. voters go to the polls in the midterm elections Tuesday, while oil prices rebounded slightly from their sharp fall on Monday.

The two-year Treasury yield rose 1 basis point to 4.593%, while the 10-year Treasury yield increased 2.1 basis points to 4.914%, according to Tradeweb.

Iran War Threatens Record Annual Drop in Global LNG Supply, IEA Says

Gas markets are facing a major squeeze, with liquefied-natural-gas output set for its steepest annual decline on record as the Iran war chokes off supplies and intensifies competition among importers, the International Energy Agency said.

Global LNG supply is forecast to fall by 3% this year, or nearly 20 billion cubic meters, as disruptions to shipping in the Strait of Hormuz-which used to carry around 20% of the world's LNG flows-and Iranian attacks on key regional infrastructure sharply curtailed exports from Qatar and the United Arab Emirates.

Trump Surprises Republicans With Election-Eve Speech About Reflecting Pool

WASHINGTON-It was a picture-perfect setting for the closing argument of a contentious campaign season. But when President Trump stepped up to a lectern in front of the Lincoln Memorial reflecting pool on Monday afternoon, he had another matter on his mind: rusty pipes.

"The pipes were very old and in bad shape," Trump said, holding up photos of the aging infrastructure he replaced under the reflecting pool. "The pipes now are totally renovated. They're brand new pipes."

Eager to Rebut Rogue-Nation Image, North Korea Denies Role in Binance Heist

North Korea has denied it was behind the record-breaking $6.3 billion hack of cryptocurrency exchange Binance, in a move analysts say is designed to push back against Western depictions of the regime as a rogue state.

The Federal Bureau of Investigation said in recent days that the regime of North Korean leader Kim Jong Un was responsible for last week's enormous theft. On Tuesday Kim Yo Jong, Kim Jong Un's powerful sister, fired back, calling such a claim "absurd rhetoric."

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This article is a text version of a Wall Street Journal newsletter published earlier today.

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November 03, 2026 05:17 ET (10:17 GMT)

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