Stock markets mostly rose on Wednesday after early losses as investors weighed a Democratic sweep of Congress that dealt a blow to President Donald Trump’s economic agenda, with traders divided between worries about legislative gridlock and tougher scrutiny of artificial intelligence companies.
The day began with losses. Global stocks fell and the dollar touched a one-month low as the results came in, with US stock futures sliding sharply at the worst point: S&P 500 futures were down 1.2 percent and Nasdaq futures down more than 2 percent, according to market reports gathered by The Eastern Updates. Buyers then stepped in. By later in the session the S&P 500 futures had turned up 0.2 percent and Nasdaq 100 futures 0.3 percent, and European markets in London, Paris and Frankfurt opened with gains.
Read Also: US Stocks Surge On Hopes Iran War Will End Soon
Trump’s remarks shifted during the night. Before the results, he had threatened to veto any Democratic legislation. As the numbers arrived, he took a more conciliatory tone, saying he was “absolutely willing to accept those results” and expected to work out deals with the Democrats. According to market reports, that supplied the cue for a bounce in several markets, along with the dollar and Treasury yields.
The vote itself was pitched as a referendum on the White House, held while voters were angry about surging gasoline prices, tariffs and the war on Iran. Democrats flipped the Senate and the House, including once-safe Republican seats, as Trump enters his final two years in office.
Analysts split on what that means. Chris Weston of Pepperstone flagged the potential for legislative gridlock, fiscal brinkmanship, debt-ceiling disputes and congressional investigations. He added, though, that the president would retain “considerable executive authority,” so the implications for individual sectors are far from straightforward. David Chao of Invesco wrote that Democratic control will make it harder for the administration to pass major partisan legislation, reducing the prospect of significant additional fiscal stimulus over the next two years. For Asia, he said, less stimulus could ease upward pressure on US growth, inflation and Treasury yields, and take some pressure off Asian currencies and monetary policy.
Charu Chanana, chief investment strategist at Saxo in Singapore, said markets appeared to be pricing in a “stronger-than-expected Democratic showing” that could reduce expectations for more fiscal stimulus. Prediction markets had signaled growing expectations of a sweep, with more than $1.48 billion wagered on the midterms.
The artificial intelligence trade bore the sharpest pressure. Traders worried that a Democratic Congress would apply more scrutiny to the sector and that anger over data center construction, which many Democrats used in their campaigns, could complicate the AI buildout. Prashant Newnaha, a senior rates strategist at TD Securities in Singapore, pointed to “tighter regulatory scrutiny” of technology and AI companies. Stephen Innes of SPI Asset Management said the concern is not that a Democratic governor automatically shuts the gates on data center construction, but that a change in political leadership could alter the regulatory environment just as developers commit enormous sums to projects that depend on electricity and predictable construction schedules.
Declines concentrated in Asian chip and technology names. Japanese chipmaker Kioxia fell more than 5 percent, while Advantest and SoftBank each lost more than 3 percent, and Seoul-listed SK hynix and Samsung were also lower. Strong earnings from the chipmaker AMD eased some concerns about the durability of the AI trade, according to one account. Solar stocks rallied, with Hanwha Solutions up as much as 10 percent, according to one market report.
Read Also: NGX Investors Record ₦390bn Gain Amid Bullish Run
Bond and currency markets told a similar story. Treasuries rallied as investors bet that gridlock would curb deficit-expanding legislation and new Treasury issuance. The 10-year yield fell as much as 6 basis points overnight to a low of about 4.89 percent, and was down about 3 basis points at 4.92 percent later in the session. The euro rose to $1.1233 from $1.1191 on Tuesday, the pound to $1.3473 from $1.3413, and the dollar slipped to 158.10 yen from 158.75. Gold rose 2.3 percent to $4,021 an ounce, according to one report.
Asia split. Hong Kong, Shanghai and Seoul reversed early losses, and Mumbai, Bangkok, Wellington and Manila rose, while Tokyo, Sydney, Taipei and Jakarta fell. The Hang Seng finished up 1.7 percent at 23,919.50 and the Shanghai Composite up 2.2 percent at 3,686.17, while Tokyo’s Nikkei 225 closed down 1.4 percent at 62,188.63. In London, the FTSE 100 was up 0.2 percent at 10,663.78. On Wall Street, the Dow had closed Tuesday down 0.4 percent at 51,786.72.
Oil edged higher as investors watched the Middle East. Trump confirmed US strikes on Iran but played down speculation that he was preparing to resume bombing after the election, saying the United States was ready if needed. Iran’s President Masoud Pezeshkian said his government was still trying to resolve the crisis through dialogue and that no one would benefit from renewed war. Parliament Speaker Mohammad Bagher Ghalibaf said Iran was “ready for battle with its finger on the trigger.”
West Texas Intermediate was up 0.3 percent at $96.37 a barrel and Brent North Sea crude up 0.4 percent at $104.02.
