Stocks slip as AI jitters, US midterms keep investors on edge

By Niket Nishant and Gregor Stuart Hunter

Nov 3 (Reuters) - A fresh bout of AI anxiety pressured global stocks on Tuesday, while investors were on tenterhooks as voting began in crucial US midterm elections.

Traders on Polymarket see about a 77% chance of Democrats winning both chambers of the US Congress, an outcome that could lead to tougher oversight of AI and more corporate regulation.

"In the case of a full blue sweep, I would expect some populist measures against AI. The narrative against data centres would get a tailwind," said Alexander Lis, chief investment officer at Social Discovery Ventures.

Big Tech's lacklustre earnings and steep capital spending targets have unnerved Wall Street in recent days, putting the election verdict under greater scrutiny.

Futures tracking the tech-heavy Nasdaq-100 index were broadly flat while S&P 500 contracts dropped 0.14%. The indexes fell for a third straight session on Monday.

The pan-European STOXX 600 index was down 0.6% to 645.36 points. South Korea's KOSPI benchmark fell 3.6%, while Taiwan's index dropped 3.6% for its steepest one-day decline since late July.

MSCI's gauge of stocks across the globe slipped 0.26%.

The dollar index, which measures the currency against a basket of peers, dipped to 101.69. It hit a one-month low on Monday.

The yield on the US 10-year Treasury note rose 1.2 basis points to 4.9064%.

A surprise Republican sweep would likely lift yields and the dollar, said Steve Englander, co-head of FX research at Standard Chartered. 

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Apple on Monday forecast lower gross margins for the crucial holiday quarter, citing rising memory-chip costs, and projected services revenue growth that fell well short of Wall Street expectations.

The iPhone maker's forecasts deepened the gloom in markets, which have been disappointed by lukewarm results from tech heavyweights.

Brent crude futures rose 1.6% to $106.44 a barrel. Oil prices have whipsawed this week on conflicting signals from the US and Iran on ending the war in the Middle East.

The US carried out strikes on Iran's Qeshm Island in the Strait of Hormuz, a US official told Reuters on Monday, confirming an earlier Wall Street Journal report.

Hours before, US President Donald Trump had said a deal to end the war "could happen". Qatari mediators also travelled to Tehran for talks with Iranian Foreign Minister Abbas Araqchi on a potential US-Iran deal.

"I don't think you could build a high conviction view based on the Iran developments right now. And I think more investors should think the same way as I do," said Lis.

The Chinese yuan weakened against the US dollar after the People's Bank of China said it would raise the foreign exchange reserve ratio, a move aimed at putting the brakes on a long rally in the yuan.

Cryptocurrencies remained choppy after last week's Binance hack. Bitcoin nudged 0.1% lower to $76,638.66 and ether was unchanged at $2,254.05.

(Reporting by Niket Nishant in Bengaluru and Gregor Stuart Hunter in Singapore. Editing by Jamie Freed and Mark Potter)