Global Markets Brace for US Midterms Amid Corporate Earnings Woes

The Tel Aviv Stock Exchange is set to open after a volatile post-election period, closing mixed yesterday with the TA-35 index gaining a slight 0.25% and the TA-90 index losing 0.5%. Investor attention is also focused on the upcoming US midterm elections, which could impact the Israeli market. Asian markets showed mixed performance, with Japan's Nikkei down 2.3% and South Korea's Kospi down 4.2%, while Hong Kong's Hang Seng rose 1.6%. US stock futures are down, with the Nasdaq shedding 2% due to significant drops in Amazon and Intel following their quarterly earnings reports.

Dual-listed Israeli stocks showed mixed arbitrage gaps, with Teva up 1.5% and Palo Alto and Elbit up around 0.5%. Conversely, Tower and Kamatech saw negative gaps of 2.5% and 1.7% respectively. The insurance index fell 2.5% yesterday, dragged down by Ayalon and Winsure, as Ayalon is reportedly considering exiting its provident fund business and potentially joining the acquisition of Altshuler Shaham Finances. The biomedical and banking indices performed well, rising 1.4% and 0.8%, while the defense stocks index saw a slight increase, led by Elbit Systems' 3% jump.

In corporate news, Alfred Akirov's tender offer for Alrov Real Estate and Hotels was accepted, leading to its delisting from the Tel Aviv Stock Exchange. This move may pave the way for Akirov to pursue control of Clal Insurance Enterprises Holdings. Separately, Menora Mivtachim Group increased its stake in Hagej Group to approximately 6.57% after acquiring one million shares for about NIS 20 million.

Globally, US stock markets closed lower, led by technology stocks after disappointing earnings from Alphabet and Caterpillar. The Nasdaq fell 1.5%, the S&P 500 dropped 0.4%, and the Dow Jones declined 0.3%. Alphabet's stock plummeted 13%, its worst day ever, after missing revenue and earnings expectations. Intel's stock plunged 21% following a weak forecast and a slowdown in the PC market. Amazon's stock fell 6% in after-hours trading after its Q3 results missed Wall Street's expectations.

In bond markets, Schroders economists have adopted a neutral stance on government bonds due to fiscal concerns and interest rate uncertainty, while maintaining a negative recommendation on corporate bonds. The Israeli Shekel remained stable against the dollar, closing at 3.114, following a volatile week. The cryptocurrency exchange Binance is facing a major security incident involving the transfer of over $3 billion in digital assets, leading to a Bitcoin price drop to a six-week low. Oil prices remain high, with Brent crude at $111 per barrel, influenced by fears of potential US action against Iran post-midterm elections. Gold prices are around $3,997 per ounce, with Saxo Bank predicting a rise to $5,000-$5,500 next year.

In macroeconomics, the European Central Bank (ECB) kept interest rates unchanged at 2.5% but signaled a potential December rate hike due to rising energy prices. ECB President Christine Lagarde announced she will leave her post on February 7, 2027. The US Federal Reserve maintained its interest rate between 3.75%-4%, with Chairman Kevin Warsh announcing seven out of eight policy meetings next year will include interest rate votes. The US economy grew 3.4% in Q3, exceeding forecasts, while inflation rose 0.5% in September.