The US dollar and crude oil prices dropped on Wednesday as investors reacted to the Republican party losing control of Congress in the US midterm elections.
LONDON: The dollar and oil prices dropped on Wednesday as traders digested President Donald Trump’s heavy defeat in US midterm elections that saw his Republican party lose control of Congress.
Democrats seized control of both houses in a landslide victory that gives them the power to block legislation, launch investigations into Trump’s administration and thwart his judicial and senior government appointments.
“Investors are trying to get their heads around what a Democrat landslide means for financial markets,” noted Russ Mould, investment director at AJ Bell.
“The big risk is uncertainty around how Trump could act in the coming months following such a result.”
The dollar sank against other major currencies on fears the vote outcome could lead to US political gridlock, after Trump warned that he would become “Mr Veto”.
Technology firms also slumped amid suggestions Democrats could prioritise AI regulation.
But European stock markets posted gains in Wednesday morning trading.
London, Frankfurt and Paris all rose by more than one percent — investors brushing off official data showing eurozone inflation reaching a three-year high of 4.0 percent.
That followed a largely solid performance by equities across Asia, though Tokyo ended lower as its tech sector struggled.
Tens of millions of Americans voted in the crucial polls pitched as a referendum on the White House, as anger grows at surging petrol prices, the impact of tariffs and the Iran war.
Chris Weston, analyst at broker Pepperstone, stressed that Trump retained “considerable executive authority” so the possible impact was “far from straightforward”.
Bond yields avoided the volatility seen recently, while gold benefitted from its status as a safe haven investment.
Aside from the US vote, investors continued to follow third-quarter earnings.
BMW said Wednesday it would step up planned job cuts as it reported a drop in third-quarter profit, hit by cutthroat competition and falling demand in China, the world’s largest car market.
Google meanwhile said it planned to invest $15 billion in Malaysia over the next two years to build data centres and other infrastructure.
