Stocks gain, dollar flat as U.S. elections prompt investor caution

NEW YORK (Reuters) – U.S. shares rose on Tuesday while the dollar held steady as Americans went to the polls in elections that could shift the balance of power in Congress.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., November 1, 2018. REUTERS/Brendan McDermid

Treasury yields rose modestly as more supply came to market and spurred selling. Traders also awaited clues about the Federal Reserve’s potential interest rate increases when policymakers meet on Wednesday and Thursday.

Treasury supply has been growing to fund a widening federal budget deficit, the result of the massive tax cut enacted in December and a spending agreement reached in February.

MSCI’s gauge of stocks across the globe .MIWD00000PUS gained 0.12 percent.

The congressional elections mark the first major test of President Donald Trump’s polarizing personality and hardline policies on taxes, trade and immigration. If his Republican party loses control of the House of Representatives or the Senate, Democrats would be able to put the brakes on his agenda.

Opinion polls show Democrats have a good chance of winning a majority in the House.

“Unlike the U.S. presidential election or the UK’s Brexit referendum, the upcoming U.S. elections are not a binary event,” said Yasuo Sakuma, chief investment officer at Libra Investments. “So it’s unlikely to send stocks significantly in one direction, apart from initial quick reactions.”

European shares slipped on disappointing corporate earnings and caution ahead of the U.S. election results. Politics weighed on Italian stocks, and oil prices fell as investors digested exemptions to the newly restored U.S. sanctions on Iranian oil.[.N]

The pan-European STOXX 600 index lost 0.26 percent.

On Wall Street, the Dow Jones Industrial Average .DJI rose 173.31 points, or 0.68 percent, to 25,635.01, the S&P 500 .SPX gained 17.14 points, or 0.63 percent,

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