Hong Kong (AFP) – Stock markets mostly rose Wednesday as investors assessed the impact of a Democratic sweep of Congress that dealt a blow to Donald Trump’s economic agenda as he heads into his final two years as president. Equities and the dollar sank initially amid warnings that the result — which saw Republicans ousted in a so-called blue wave — could lead to gridlock on Capitol Hill after Trump warned that he would become “Mr Veto”.
Tech firms, already under pressure, were also hit by concerns about the future of data centre building — a major bone of contention in many places. Tens of millions of Americans cast their vote in the crucial polls pitched as a referendum on the White House amid anger at surging petrol prices, tariffs and the Iran war. With Democrats winning key races to flip the House and Senate — including once-safe Republican seats — Chris Weston at Pepperstone flagged “the potential for legislative gridlock, fiscal brinkmanship, debt-ceiling disputes, and congressional investigations.” However, he added that “the president would retain considerable executive authority, so the implications for individual sectors are far from straightforward”.
Trump threatened in a telephone interview with the CBS network on Tuesday to be “Mr Veto” and block any Democratic legislation if they win. The prospect of Congress coming to a standstill weighed on the dollar and Treasury yields, with observers pointing out that such a scenario would restrict spending. “Democratic control of Congress will make it harder for the White House administration to pass major partisan legislation. That could reduce the prospect of significant additional fiscal stimulus over the next two years,” wrote David Chao at Invesco. “For Asia, the implications matter. Less fiscal stimulus could reduce upward pressure on US growth, inflation and Treasury yields, potentially easing some of the pressure that higher US rates and a stronger dollar have placed on Asian currencies and monetary policy.”
However, as the results came in, he offered a more conciliatory tone to the New York Times, saying he was “absolutely willing to accept those results” and expected to work out deals with Democrats. That provided the queue for a bounce in some stock markets, as well as the dollar and Treasury yields. Hong Kong, Shanghai, Seoul reversed losses, while Mumbai, Bangkok, Wellington, and Manila were also up. However, Tokyo, Sydney, Taipei, and Jakarta all fell. London, Paris, and Frankfurt opened with gains.
While they managed to pare losses, tech firms remained under pressure as investors continue to fret over the AI investment boom and when firms that have pumped billions into the sector will eventually see returns, if ever. Traders were also nervous about the outlook for the AI buildout, with many Democrats taking advantage of anger over data centre development. “The concern isn’t that a Democratic governor automatically shuts the gates on data-centre construction,” said Stephen Innes at SPI Asset Management. “It is that a change in political leadership could alter the regulatory environment just as developers are committing enormous amounts of capital to projects dependent on electricity availability and predictable construction schedules.”
Japanese chipmaker Kioxia plunged more than five percent, while Advantest and SoftBank lost more than three percent. Seoul’s SK hynix and Samsung were also down. Oil prices edged up as investors kept tabs on the Middle East after Trump confirmed US strikes on Iran but played down speculation he was preparing to resume bombing after the election. “We seem to be getting everything we want,” he told the Financial Times newspaper on Tuesday. “I’m ready, we’re ready. We’re locked and loaded if we need to go, but there may be no reason for it.”
His Iranian counterpart Masoud Pezeshkian said his government was still trying to resolve the crisis “through dialogue”, adding that “no one will benefit from this war” if it reignited. However, Iran’s chief negotiator, Mohammad Bagher Ghalibaf, said the Islamic republic was “ready for battle with its finger on the trigger”, while Deputy Foreign Minister Kazem Gharibabadi said Tehran retained the right to “legitimate self-defence.” He later posted on X that “Americans said NO TO WAR, and we endorse this message.”
– Key figures at around 0815 GMT –
Tokyo – Nikkei 225: DOWN 1.4 percent at 62,188.63 (close)
Hong Kong – Hang Seng Index: UP 1.7 percent at 23,919.50 (close)
Shanghai – Composite: UP 2.2 percent at 3,686.17 (close)
London – FTSE 100: UP 0.2 percent at 10,663.78
Euro/dollar: UP at $1.1233 from $1.1191 on Tuesday
Pound/dollar: UP at $1.3473 from $1.3413
Dollar/yen: DOWN at 158.10 yen from 158.75 yen
Euro/pound: DOWN at 83.40 pence from 83.43 pence
West Texas Intermediate: UP 0.3 percent at $96.37 per barrel
Brent North Sea crude: UP 0.4 percent at $104.02 per barrel
New York – Dow: DOWN 0.4 percent at 51,786.72 (close)
© 2024 AFP
