Asian stocks and dollar decline amid Democratic successes in US elections
Democrats gained control of the US Senate and moved closer to a majority in the House of Representatives
Asian stock markets declined on Wednesday: the Tokyo index lost 2.85%. Simultaneously, the dollar weakened against major currencies amid uncertainty over future US policy following the midterm elections.
By morning in Europe, Democrats had secured control of the Senate and, according to preliminary results, could gain a majority in the House of Representatives. This would mark a significant setback for President Donald Trump and the Republican Party, which had controlled both chambers of Congress during the first two years of his second term.
Voter sentiment was influenced by the cost of living, including high gasoline and diesel prices. Some campaigns also discussed the construction of data processing centers. Notably, in the Ohio Senate race, Republican John Husted lost to Democrat Sherrod Brown.
The election results may impact the development of artificial intelligence. Some Wall Street investors fear that full Democratic control of Congress could lead to increased regulation and restrictions for the industry. Other market-sensitive topics include US fiscal policy, defense spending, and regulation of healthcare, banking, and cryptocurrencies.
However, divided government could limit the scope of changes in Washington. Trump stated he would become 'Mr. Veto' and block Democratic initiatives if the party gained control of Congress, though compromises between the sides remain possible.
Pepperstone analyst Chris Weston warned that such a configuration could lead to political gridlock, budget disputes, debt ceiling battles, and congressional investigations. In his view, the president would retain significant executive powers, making the consequences for individual sectors ambiguous. Weston also believes that a limited Democratic victory may have already been priced in, whereas a decisive outcome would have forced markets to reassess Trump’s remaining agenda and the political trajectory through 2028.
Futures on major European indices lost between 0.3% and 0.5% in the morning, while Euro STOXX 50 contracts declined more sharply. The euro strengthened against the dollar, the pound rose, and the yen continued to appreciate against the US currency. Yields on German and French government bonds edged lower. The yield on 10-year US Treasury bonds, after an initial decline, returned to growth.
The decline affected Tokyo, Shanghai, Sydney, Seoul, and Singapore, while the Hong Kong market gained. Technology stocks also came under pressure as investors questioned when companies that have invested billions in artificial intelligence would begin to see returns on those investments.
Shares of SoftBank Group, an investor in OpenAI, fell by 8% earlier. South Korea’s Kospi ended the morning session in the red, Hong Kong’s Hang Seng rose, and the Shanghai Composite declined. The Australian market also lost value after the country’s central bank raised interest rates on Tuesday. Taiwan’s Taiex fell.
The previous day, the S&P 500 index rose, though most of its constituent stocks declined. The Dow Jones Industrial Average fell, while the Nasdaq Composite gained.
Oil prices also declined: Brent crude traded below $104 per barrel in the morning, while the US benchmark grade cost around $96. Gold, meanwhile, appreciated by nearly 0.5%.
