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STOXX 600 down 0.5%
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U.S. midterms too close to call
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Cryptos seek floor
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U.S. stock futures mixed
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REAL ESTATE: PRICING IN BALANCE SHEET RESTRUCTURING (1104 GMT)
RBC Capital Markets has taken a fresh look at European real estate, which, after a more than 40% drop so far in 2022, is the worst-performing sector within the STOXX 600 equity benchmark.
For RBC, such stock-market carnage reflects a chance that there may have to be balance sheet restructuring in the highly leveraged sector. But overall, the investment bank sees this as unlikely, given headroom for property revaluation.
"The levels of revaluation headroom to debt covenants leads us to believe that significant dilutive balance sheet restructurings are unlikely for our coverage in general," says RBC, adding that current prices offer attractive entry points.
Contrary to investor fears of possible cuts to dividends, RBC also sees payouts as largely safe, given that benefits would generally not be enough to make it likely.
"Given the potential negative consequences for many landlords... from paying lower than expected dividends, we believe most are likely to conclude that the benefits in respect of debt covenant headroom are insufficient," they say.
"For many REITs significantly reducing dividends risks leading to corporation tax being payable," they add.
The STOXX Real Estate index is trading a touch above where it was last month, when it hit its lowest point on record relative to the broader STOXX 600.
U.S. ELECTIONS OR THE FED? (1031 GMT)
What counts more for financial markets U.S. mid-term elections or Federal Reserve's monetary policy?
Some market participants argue the U.S. central bank will remain in centre-stage no matter the election results.
"The election likely proves of little importance to a market that remains one giant rate trade driven by inflation and the Fed," says Garrett Melson, portfolio strategist at Natixis Investment Managers Solutions.
"The year-end push will come down to a tug of war between stubbornly strong inflation and growth, prompting continued hawkish rhetoric and bearish sentiment," he adds.
He says the delayed effects of the election, as debate heats up over the budget- and ceiling heats up, will come into sharper focus in mid-to-late 2023.
"One could also come to the conclusion that the subject is of little interest to the forex market," Ulrich Leuchtmann, head of forex research at Commerzbank, says.
"It was only discussed so intensively in a forex context because writers had to fill the gap until the next really important event for the USD exchange rates came along (the U.S. inflation data on Thursday)," he adds.
Republicans are favoured to win control of the House of Representatives, polls and betting markets show, with the Senate seen as a closer call, while polls remain open in some states.
STOXX SLIPS AHEAD OF U.S. MIDTERM RESULTS, ITHACA DEBUTS (0745 GMT)
European shares fell as investors awaited the results of U.S. midterm elections, with markets expecting power in the U.S. Congress to shift to Republicans.
The pan European STOXX 600 index is down 0.4% with retailers and risk-sensitive travel and leisure stocks leading losses, down around 1%.
Stocks in UK's pub owner J D Wetherspoon fell 7% after sales had slowed in October. The pub group remained "cautiously optimistic" about its future prospects as younger Britons flock to its taverns.
ITV shares are down 6% after the British broadcaster forecast slightly lower ad revenue for 2022 despite a FIFA World Cup boost in the key Christmas quarter, and warned on the high degree of economic uncertainty.
Shares in Ithaca Energy opened 2% below the price of 250 pence set for their initial public offering, with the company delivering Britain's largest IPO this year.
BANK MAN FRIED (0724 GMT)
Six billion dollars of withdrawals in 72 hours have sent cryptocurrency exchange FTX into the arms of larger rival Binance and crypto markets into a new tailspin.
"We are in the best of hands," FTX founder Sam Bankman-Fried said on Twitter, after announcing a bailout that has not quite soothed market jitters. Bitcoin was falling in Asia on Wednesday, so was FTX's collapsing token and Binance's token had the wobbles.
Broader markets were steady.
Just a few months ago it was FTX scooping up wounded competitors at a discount. Its fall is perhaps another case of the cautionary "stadium curse".
As Spectra Markets' Brent Donnelly and others have previously noted, naming rights are a reasonable signal of irrational exuberance. Enron's 30-year rights deal for a baseball field in Houston lasted three years.
FTX's 19-year deal for naming rights at the Miami Heat basketball team's home arena looks to face a similar fate, as does its sponsorship of the Mercedes F1 team. Spillover to other asset classes is so far limited.
Currency markets were calm in Asia trade, with investors waiting for more conclusive results from the U.S. midterm elections - which could take days - and positioning ahead of U.S. inflation data on Thursday.
China's factory gate prices dropped for the first time since December 2020, and consumer inflation moderated, underlining faltering domestic demand. Japanese manufacturing optimism dropped to a 22-month low.
U.S. and European futures were steady. MSCI's broadest index of Asia-Pacific shares, excluding Japan , nudged higher.
Key developments that could influence markets on Wednesday:
U.S. midterm results, RBA deputy governor speech, ECB's Elderson appears on a panel, U.S. 10-year Treasury auction
Earnings: Swiss Life, Adidas, ITV , Taylor Wimpey, Commerzbank, M&S , Poste Italiane, Telecom Italia.
EUROPEAN STOCKS SEEN LOWER, U.S. MIDTERM IN FOCUS (0638 GMT)
European stocks look set to open lower with futures pointing to declines with U.S. mid term election deciding whether the Democrats retain congressional control halfway through President Joe Biden's term.
Investors are expecting Republican gains, a result that could ease worries about Democratic spending and regulation but set up a bruising fight over raising the U.S. debt ceiling next year.
In London, North Sea oil and gas producer Ithaca Energy's <IPO-IHEG.L> is set to debut, in a closely watched initial public offering as European markets have starved of IPO since Russia's invasion of Ukraine.
Investors will be also evaluating a mixed bag of earnings, with UK housebuilder Taylor Wimpey Plc flagging a drop in its sales rate and cutting its volume outlook, while truck maker Iveco Group raised again its forecasts for this year's results.
