US Election Day: Trump Risks Losing Control of Congress

Live from Brussels, this is Bloomberg Daybreak: Europe. The AI selloff extends into Asia as the Nasdaq enters a correction. Apple and Palantir fall after earnings, adding to negative sentiment. Early day in the USA: President Trump faces the biggest political test of his second term as the Democratic Party targets control of Congress. Oil holds onto declines as the U.S. and Iran signal willingness to pursue peace talks. Japanese markets closed.

We are still looking at downward pressure on Asian equities. The MSCI index out of Japan down 1.7%. European stock futures also pointing to a negative open after the drop on the Nasdaq and the question around oil prices. Some relief in the inflationary pressure, but still close to $106 a barrel after the drop yesterday. Let's get you set for the day ahead.

Let's start with breaking news from Lufthansa. Third-quarter adjusted EBITDA coming in ahead of estimates at 1.41 billion euros. The forecast from Lufthansa cutting its adjusted EBITDA forecast for this year. We heard this from Michael O'Leary of Ryanair talking about their two billion euro extra fuel bill for next year as well. Those fuel cost numbers and focus for Lufthansa as we have been looking at the guidance being refined. They are saying the fully adjusted EBITDA from 1.7 to 2 billion euros, a trim from the previous guidance. The upper range had been 2.2 billion euro. Outlook trimmed at Lufthansa after what we have seen from them this morning. Tech weakness extending into Asia. Let's see how markets are faring with Winnie Hsu in Hong Kong.

Sizable downward moves in Asian markets as investors question the sustainability of the AI trade, especially as we see U.S. chipmakers falling overnight, plus mixed earnings from Apple and spending plans from Anthropic, and caution ahead of U.S. midterm elections because it can potentially weigh on the data center buildout. Tech-heavy gauges in the region leading losses today. The likes of Korea and Taiwanese stocks down 3.6% at the close, which made it enter technical correction territory, down about 13% from its peak in October. Cross-asset wise, we are seeing the Aussie dollar weakening despite the central bank in Australia raising rates today because of the split vote. The lack of hawkish commentary sees investors trimming their bets on further rate hikes to come. Take a look at Chinese assets, because we are seeing the tech stocks in Hong Kong doing better than the rest of the gauges as investors rotate away from AI names and into non-AI names, including consumers, e-commerce names. The interesting thing about the mainland side, hearing authorities introducing tools to inject further liquidity into the market. CSI 300 still down about 1%, so still lots of skepticism in terms of how much of a floor can the authorities provide the stock market with. On the FX side, we have heard from PBOC that they are asking banks to raise foreign currency reserves, and that is to slow down the appreciation of the yuan. You can see the offshore yuan weakening for the first time in three weeks, and the onshore also pairing the longest winning streak, first time in three decades.

Thank you very much. Americans are heading to the polls today for the midterm elections, with a contest for control of Congress the coming the biggest political test of President Trump's second term. Trump made his final pitch to voters in front of the reflecting pool in Washington, D.C.

The Democrat Party has nominated the most extreme and dangerous slate of candidates in American history. With your vote, we will decide. These extremists will be given power or not power. We will either keep America strong. I think we are having the golden age of America. We have never done anything like it before. For some reason, the sitting president doesn't win the midterms, that we gave this a very strong shot.

Oliver Crook is live in New York for more. We heard President Trump perhaps playing down expectations for these results. Polls are opening in a few hours. What are we watching?

The final case made by the president at the reflecting pool in Washington, D.C., making similar comments we have heard over the last couple of weeks, calling the Democrats extremists, communists, jihadists. But now it is time for the polling, the arguments to end. The real polls open in New York City in about five hours, 6:00 a.m. local time, close at 9:00 p.m. Some polling closes earlier throughout the day. 6:00 p.m. Eastern time is when you get the first polls closing. The final poll will be on the furthest western point of Alaska in about 24 hours. It will take a number of hours, days to get the final outcomes. But within the first few hours of the closing of polling, we will begin to amass an idea of whether this blue wave across the House and potentially Senate is going to become a reality. If we look at the polls over the last couple of days, there has been an upsurge in terms of polling representation for the Democrats. A lot of Senate votes that were going to be close, potentially Republican. You can see a lot of polls in Alaska, Kansas, Maine, Iowa, Ohio, North Carolina, Texas, all states held by Republicans potentially going to the Democratic side with that sizable lead. There is that big question for everybody: will there be that blue wave or is it going to be another letdown?

We also have the Supreme Court defeat for the Trump administration in the past few hours. Its bid to set aside thousands of ballots in California. How significant is this ruling, and is it a sign of the legal wrangling that could be yet to come?

It could be foreshadowing the different techniques that could be used by the Trump administration to cast doubt over the results. Obviously, this is a president who still denies the outcome of the 2020 election. This attempt by the DOJ was to put aside up to 20,000 ballots in California. Apparently, they say they were likely non-citizens these ballots belong to. The Supreme Court elected not to intervene on behalf of the president, so that effort at least has failed. But as you say, the president will be looking at other ways to potentially contest outcomes, if there is that sizable blue wave. It may make it more difficult for the president to contest results. As we just mentioned, this is a president that still denies the 2020 election, so this is firmly within the Trump playbook.

Thank you very much. Don't miss our special coverage of the midterm election results kicking off at midnight U.K. time, 1:00 a.m. in Brussels. Experience more of Bloomberg's coverage for free during the U.S. election on our website and our news app. Apple shares fell into the red after the bell, with the tech giant delivering a mixed outlook to investors in its first quarterly report under CEO John Ternus. For more, let's bring in our Bloomberg equity strategist. Apple's forecast for the holiday period for the end of the year topped expectations, so why are investors disappointed in what they heard? Good morning.

As you mentioned, the forecast topped expectations. It was a pretty good quarter from Apple, top and bottom line, with good growth across different divisions. iPad revenue was a touch lighter than the consensus was expecting, but in general a good quarter. The increasing concern for the market is around margins. Although revenue forecast of 7% to 10% was ahead of what the street was expecting, gross margin guidance around 46% was a touch lighter than the current quarter. In recent months, Apple has been pushing through price increases to counteract the impact from the memory market and memory costs. That's going to be the debate going forward for the stock: can they preserve margins while increasing prices? That is the tension. Selloff after hours was marginal. This is a stock that has outperformed the Nasdaq by about 10% over the past month. A bit of profit-taking given the good quarter and the slightly soft margin cuts.

Palantir also reporting. What did that company tell us about sales growth, and how does it feed into the broader AI sentiment?

Palantir delivered a very strong quarter. This is a company that has been growing revenues at a very strong rate, almost an $8 billion run rate. The big takeaway for investors this quarter was U.S. commercial revenue is growing extremely quickly, almost 150%, and it has topped government revenue. Government revenue historically has been the biggest driver of sales, but now they are making good strides in the commercial segment, and investors are giddy about that. However, the stock is trading at a very rich multiple, almost 100 times forward earnings, so a lot of that good news was priced in.

Thank you for bringing us up to date on those key tech earnings stories. Part of the broader sentiment we have seen in the tech space, with the Nasdaq 100 closing in correction territory as concerns around the AI trade continue to mount. We have been getting takes from top finance executives at the HKMA summit in Hong Kong.

I can't tell you it will go without bumps in the coming years. I can say when you step back and look 5, 10 years from now, I'm excited about how this technology can get deployed in the economy and drive productivity gains that can be really fruitful.

We are living with the greatest technological advances I have seen in my lifetime. It takes a long time for that to come into businesses.

Right now, if you look at demand and supply, it's hard to call it a bubble.

The fact there is more discernment helps keep a lid on any bubble-type risk in the AI market.

You can try to be half a step behind either on the demand or paces behind. Technology gets ahead of you.

Yes, there has been $500 billion of AI financing, but that's not what's driving the rates. If that was the case, you would see some distortion of spread in the swap curve, and that hasn't happened.

I know there's lots of doom and gloom. I think there are questions and issues as we look at the AI sector, but I think there's lots of tactical trades around.

Let's bring in the cross-asset strategist from our Markets Live team. Divergence of views. Some positivity around AI, but we did also hear the PIMCO CEO saying AI financing could be too much, warning of a substantial bear market ahead. Talk to us about where the sentiment is now. Can we see this tech selloff deepen further?

I think the dichotomy is clear. It's between what is happening to AI as a technology and what is happening to AI stocks. AI as an industry is a sunrise industry. It's going to revolutionize mankind, no question about that. It's about the valuation side and the debt side of things that we are more interested in at the moment. If you look at the Nasdaq, it sold off successively in the past few days, and I think that's likely to continue. If you look at the forward earnings multiple attached to the Nasdaq 100, it's way higher than the median. There is definitely a case for earnings multiple to come back to the median. And the equity risk premium has been significantly negative, and that can't carry on for long. The markets are aware we are inching towards frothy valuations, and therefore they are taking periodically money off the table, perhaps more quickly than before. I think that sets renewed bouts of volatility in the coming days.

We are counting down to the start of voting on midterm elections in the U.S. Could this be a significant market event as the results start to come through?

I think the markets have priced in overwhelming Democratic dominance in the midterm polls. I think if there is a surprise, to the extent there is a surprise, the markets will react. But I think there are more hurdles for the market. One of them is going to be the pricing of the Fed. I think that the markets, if you wind the tape back to 2023, the markets are being successively underpricing how much the Fed has got its work cut out to do. I think that will be a theme going forward into 2027.

Thank you very much for joining us. Still ahead, how a key Republican strength has turned into a weakness on voting day in the U.S. midterms. We discuss the issues with George Pollack. Plus, hopes of U.S.-Iran talks gaining ground as oil moves steady but tensions remain after strikes on Iranian targets. We will have the latest next. This is Bloomberg.

Welcome back to Bloomberg Daybreak: Europe. Oil steadying after a sharp drop yesterday as hopes build that the U.S. and Iran could be moving closer to a negotiated settlement. Both sides are signaling a willingness to keep talking even as tensions remain high in the Strait of Hormuz. Let's bring in Paul Wallace for more on this. What can you tell us about the signs of progress toward a diplomatic deal that we are seeing play out in oil markets?

In the last 12 hours or so, I think Donald Trump and JD Vance have been sending some dovish signals. They've been signaling that they are more optimistic than they were previously about a diplomatic resolution to this Iran war, and sort of hinting that they will hold off on strikes for longer. I think we should note by saying there's no guarantee that they will hold off on strikes. Only a few days ago, the feeling was very much that it would happen, it was just a case of when, how long after today's midterm elections in the U.S. Trump would order them. Anyway, traders and the oil market are taking Trump's latest comments as a signal that he may hold off. There were also some comments from the Iranians that some interpreted as the supreme leader had given a green light to top diplomats to carry out more talks with the U.S. So we have had those signs, and that is why there is a less hawkish tone in energy markets. But certainly, I think we're still watching and waiting in case Trump does decide to go for strikes very, very soon. That is something that he is still saying is possible.

Very interesting to see the signals coming around diplomacy, and had reports of strikes. What does this signal in terms of U.S. intentions perhaps to resume major operations?

Those strikes on the island which sits right in the middle of the Strait of Hormuz are very interesting. On the one hand, the U.S. strikes clearly weren't that big. The U.S. didn't make a big announcement about that, and it is signaling that these were defensive in nature, almost tit-for-tat responses to Iranian attacks probably against ships in and around the Strait of Hormuz. That all signals that there is really not an escalation. There are some people wondering whether this is the U.S. trying to soften up Iran's defenses. There are kind of two ways to read this, but I think the U.S. for now is saying this is not about escalation, these are very much defensive strikes in the Strait of Hormuz.

Okay. Thank you very much for bringing us up to date with the latest as we are continuing to watch the oil price reaction to those headlines out of the Middle East. Let's go to Abu Dhabi now. Speaking to Abeer in Abu Dhabi, let's listen in.

The electricity market is growing 3%, 4% per year. This is obviously what creates the challenges to have enough supply fast enough.

When we talk about energy transition and when we talk about what the future looks like when we look at energy sources, do you think the ongoing active conflict, whether it is the war in Iran or between Russia and Ukraine, do you think that makes countries, governments, people, investors think about energy transition more? Where do you think that makes us look at let's double down on fossil fuels?

I never liked it five years ago and I don't like it today. Transitioning away from what? At the end, what we see is higher demand for energy, higher demand for electricity. We will need to find ways to satisfy that. And my belief is that we will look into a very diversified...

We believe that there, speaking to Abeer in Abu Dhabi. Coming up, banking a better model. How AI is being engineered into BBVA's operations. This is Bloomberg.

Looking back to Bloomberg Daybreak: Europe. World banks are investing heavily in AI with technology leadership determining who leads and who lags. Tom Mackenzie has been speaking to BBVA's global head of AI transformation, who told us the bank is in the process of scaling after promising early deployments of AI agents.

Working with OpenAI, is it all worth it? Is the cost that you are paying at BBVA to work with Colin and his team, is it paying off?

It is well worth it. I think what we've learned over the past year or so is that there's a ton of value to be unlocked, a lot of abundance to be brought which leads to our teams, our clients. And we've also learned it's not easy. It takes hard work to be done on top of all the data, infrastructure, our channels. And it's not something that can happen overnight. Over the past few months, we started to put into production solutions for our clients, for our bankers, for our risk analysts. And the metrics that we are tracking in this early deployment of agents need more clients. Now we are in the process of scaling.

That was from Tom Mackenzie's conversation as part of Bloomberg Tech in London. The event continues today with guests including ElevenLabs co-founder and the CEOs of Shein and Qonto. Coming up, the economy and immigration are taking center stage on voting day in the U.S. midterm elections. We will be discussing with George Pollack. That's next. This is Bloomberg.

Live from Brussels, this is Bloomberg Daybreak: Europe. I am Stephen Carroll with your top stories. The AI selloff extends into Asia as the Nasdaq enters a correction. Apple and Palantir both fall after earnings, adding to negative sentiment around the tech trade. Polling day in the USA. President Trump faces the biggest political test of his second term as the Democratic Party targets control of Congress. Oil holds onto much of its declines as the U.S. and Iran signal willingness to pursue peace talks. Let's get you breaking news out of the German chemicals company Bayer. Third-quarter earnings, adjusted EBIT coming in ahead of estimates, 1.62 billion euros, and their margin also beat, 16.1 percent, the third-quarter adjusted margin above the estimate of 14.2. Full-year adjusted EBITDA between 9.8 and 10.3 billion euros, better than estimated as well. Sales figures coming in stronger in the third quarter. We had a recent uplift for Bayer from a legal victory in the U.S. over its Roundup weed killer. Outlook very interesting for the German chemicals company, seeing their net 2026 financial debt between 28 billion euro and 29 billion euro. Pressure on tech shares continuing in the Asian session. MSCI Pacific index outside of Japan, as Japan is closed, lower by 1.6%. European stock futures down over 1% as we count down to the start of the European session. Nasdaq futures looking a little softer after we did have that sharp drop in the Nasdaq yesterday. Oil prices dropped almost 8% yesterday, up 1% today, still below $106 a barrel for Brent crude. The euro gaining a little, but still below the 112 level that it did hit above yesterday amid some dollar weakness. Gold prices down 0.6% after we had another session closing below $4,000 for the precious metal, despite a boost in trading yesterday. As we think about today's midterm elections in the U.S., what will they mean for President Trump's policy agenda and for the U.S. economy? Will the Democrats win control of the House and Senate? Let's discuss with George Pollack, partner and senior analyst at Signum Global Advisors. Let's start with the big expectations question. Are the Democrats setting a big bar to try to win control of both houses? How likely does it look to you?

I think if you asked Democrats in January whether they would be taking both chambers, they would call you crazy. But it's the president setting the opportunity for the Republicans to lose both chambers, and I think it's incredibly likely. I put it at 75% odds that Democrats win both chambers.