The FTSE 100 underperformed Europe on Tuesday ahead of the results of US midterm elections that could render Biden’s administration powerless.
The vote is in effect a referendum on the current government and a signal on how the US population could vote in the next election.
Although the election in itself isn’t a risk event for markets, the implications for business in the next two years are important. A major loss for Biden could also bring Trump a step closer back to the White House.
“The FTSE 100 started Tuesday on the back foot as the latest in a seemingly regular dose of political turmoil looms on the horizon in the form of US midterm elections,” said AJ Bell investment director Russ Mould.
“The Republicans are widely expected to make sweeping gains and should they control both houses of Congress then Democratic president Joe Biden would essentially be in office but not in power given the divisive nature of politics across the pond.”
“This could be a mixed blessing for markets as gridlock in Washington would at least prevent any legislation being introduced which could damage businesses.”
Corporate Results
While global markets focus on the midterms, a number of FTSE 100 companies updated investors today with mixed reactions.
AB Foods and Coca-Cola HBC provided reasonably positive updates and enjoyed positive reactions in shares while Persimmon shares were hit by poor sales figures.
AB Foods’ operating profit rebounded with the return a shoppers to Primark and recorded revenue similar to pre-pandemic levels.
Coca-Cola shares were higher after the group released a broadly upbeat statement with higher organic sales in all business segments, excluding Ukraine and Russia.
Persimmon warned investors mortgage rates were impacting sales and brought their bumper dividend payments into the spotlight. Although they didn’t make any announcement on dividends, changes to their capital allocation strategy are set to curtail available cash for distributions. Persimmon was down 6.5% at the time of writing and the FTSE 100’s worst performer on the day.