Shares fell on Wednesday as markets worldwide followed the results of the US midterm elections.
By early morning in Europe, Democrats had won control of the Senate, according to the Associated Press, and were on course to take the House of Representatives, in a major setback for President Donald Trump and his Republican Party, which has controlled both chambers of Congress during the first two years of his second term.
Voters’ concerns about the cost of living, including high petrol and diesel prices, helped drive the Democratic gains. Opposition to data centres also featured in some campaigns, including Ohio’s Senate race, where Republican Jon Husted lost to Democrat Sherrod Brown.
A significant change could have implications for the AI boom. Some investors on Wall Street fear that a Democratic sweep of Congress could lead to more regulation and restrictions on AI development.
Besides the future of AI data-centre expansion, Tuesday’s outcome could have broad implications for market-sensitive areas including the US fiscal outlook, defence spending, and regulation of healthcare, banking and cryptocurrencies.
However, a divided federal government may not deliver the change that voters are looking for. While a Democratic win could deal a hefty blow to Trump’s agenda for his final two years in the White House, the president said he would become “Mr Veto” and block Democratic legislation if the party won control of Congress. He also said deals could eventually follow.
Analysts warned this could mean very little gets done in Washington during that period.
“Democratic control of Congress would increase the potential for legislative gridlock, fiscal brinkmanship, debt-ceiling disputes, and congressional investigations,” said Chris Weston of Pepperstone, according to AFP.
However, he added that “the president would retain considerable executive authority, so the implications for individual sectors are far from straightforward”.
“A narrow blue wave may be largely priced in,” said Weston. “A commanding one could force markets to rethink Trump’s remaining policy agenda and the political trajectory into 2028.”
The uncertainty weighed on stock markets and the dollar, which weakened against major currencies.
Futures tracking Europe’s main stock indices were down between 0.3% and 0.5% at 06:00 CET, while Euro STOXX 50 futures were down 0.7%.
The euro traded at $1.1249, while the pound rose 0.4% to $1.3460. The dollar fell to ¥157.63 against the Japanese yen.
Bond yields eased a little, with Germany’s 10-year Bund yield trading at 3.35% early in the European morning and France’s 10-year OAT yield at 4.93%. The yield on the 10-year US Treasury note reversed its earlier decline, climbing back to around 4.945% at 06:00 CET.
Asian stocks fell alongside the dollar on Wednesday, with Tokyo down 2.85%, as the yen strengthened against the greenback, weighing on exporters.
There were also losses in Shanghai, Sydney, Seoul, Singapore and Taipei, while Hong Kong edged higher.
Tech firms were also under pressure as investors continued to fret over the AI investment boom and when firms that have pumped billions into the sector would eventually see returns, if ever.
As results filtered in on Wednesday, Japan’s Nikkei 225 was down 2.85% at around 06:00 CET. Earlier, shares of OpenAI investor SoftBank Group had slumped 8%.
South Korea’s Kospi index was down 1.17% at the same time. In Hong Kong, the Hang Seng rose 0.38%, while the Shanghai Composite fell 0.23%.
Australia’s S&P/ASX 200 was down 0.8%, after the central bank raised interest rates on Tuesday.
Taiwan’s Taiex was down 2.3%.
On Tuesday, the S&P 500 rose 0.4%, even though most of the stocks within the index fell. The Dow Jones Industrial Average dropped 197 points, or 0.4%, and the Nasdaq Composite climbed 0.8%.
Oil prices also declined.
Early Wednesday, the price of Brent crude, the international standard, traded below $ 104 a barrel. U.S. benchmark crude oil cost around $96 per barrel.
Gold traded at $3,958.50 an ounce, up nearly 0.5%.