Asian stocks retreat ahead of US midterms, oil steadies

Asian stocks experienced a slight downturn as the trading session began on Tuesday, with investors remaining cautious due to the upcoming US midterm elections. The MSCI’s broadest index of Asia-Pacific shares outside Japan saw a decrease of 0.9%, with Korean shares leading the decline at 3.8%. The S&P 500 e-mini futures, on the other hand, increased by 0.1%. Japanese markets, however, were closed for a holiday.

Analysts from ING noted that Tuesday would merely serve as a prelude to the more significant events of the following day, including market reactions to the US midterm elections and the US Treasury's quarterly refunding announcement. The yield on the US 10-year Treasury bond climbed 2.1 basis points to 4.913%.

Wall Street stocks experienced a minor drop, with the S&P 500 falling 0.5%. This decline was primarily due to negative earnings from the tech sector, while data revealed a surge in US manufacturing activity in October, driven by robust domestic demand. Apple's stock continued its downward trend, losing 2.8% in after-hours trading after the company forecasted lower gross margins for the crucial holiday quarter, citing increased memory-chip costs. Additionally, Apple projected services revenue growth that fell short of Wall Street expectations.

Investors are also preparing for the US midterm elections, where President Donald Trump's Republican Party faces a challenge to maintain control of Congress. Recent opinion polls suggest that the Democrats have a higher probability of winning the House, although the Senate's outcome remains uncertain.

As for crude oil prices, they steadied after a previous decline. Brent crude fluctuated between gains and losses and closed 0.1% lower at $104.72 as trading resumed in Asia. The Wall Street Journal reported that the US military had carried out a strike on Iran's Qeshm Island in the Strait of Hormuz, citing US officials. This news had led to a drop in oil prices by more than 7% on Monday, as hopes for an end to the US-Iran conflict and stabilization of Middle East crude supply increased amid peace talks between Iranian and Qatari officials.

In Asia-Pacific, Australian shares gained 0.1%, with the Australian dollar remaining steady at $0.70 ahead of the Reserve Bank of Australia's decision. The central bank is widely expected to raise its cash rate target to a near two-decade high of 4.85% from the current 4.6%. Taiwanese shares declined 1.3%, while Hong Kong's Hang Seng Index rose 0.3%.

Against the Chinese yuan, the US dollar strengthened by 0.3% to 6.6645 yuan. This came after the People's Bank of China announced that it would raise the foreign exchange deposit reserve ratio for financial institutions to 6% from 4% beginning November 15. The US dollar index, which measures the greenback's strength against a basket of six currencies, also edged up 0.1% to 101.81 following its one-month low, slipping by 0.2% on Monday.

Cryptocurrencies, meanwhile, remained volatile in the wake of the Binance hack, with investors withdrawing a net $4.72 billion in funds. Bitcoin saw a 0.5% increase to $77,112.18, while ether dipped 0.1% to $2,253.59.