Shares advance as Democrats’ victory eases political uncertainty

Global stocks surged on Wednesday following Democrats' triumph in both chambers of Congress during the US midterm elections, offering greater political clarity and less uncertainty that has hampered markets. This marked a significant loss for President Donald Trump, as Democrats achieved historic victories in historically Republican territories for the first time in decades.

The extent of the party's triumph was evident in their gains in districts that had previously been firmly conservative, indicating a political realignment that might have taken investors by surprise. On Wall Street, all three major indexes closed higher, with consumer discretionary, financial, and real estate stocks leading the gains.

Conversely, energy shares were the most significant losers of the day, with crude prices falling as Trump admitted the Iran war played a part in his party's extensive defeat. The Dow Jones Industrial Average increased by 3.03%, the S&P 500 rose 1.58%, and the Nasdaq Composite increased 1.44%. The MSCI All-World index gained 1.38%, while Europe's STOXX 600, which serves as a hedge against AI-related risks, jumped 1.82% to a two-month high.

Clayton Allison, portfolio manager at Prime Capital Financial, explained, "Markets despise uncertainty, and even though much of the result was anticipated beforehand, confirming this last night brings certainty to markets." "Now, this brings questions about what will actually occur in Washington over the next two years," he added.

"But the markets love a resolution to a catalyst event." Opinion polls revealed that Democratic voters favored greater control over AI, and investors anticipate the Democratic-controlled Congress to scrutinize the sector more closely. The AI boom has fueled global markets in recent years, fueled by heavy spending from tech behemoths racing to construct data centers and augment computing power.

This made investors particularly sensitive to anything that could disrupt the technology's swift expansion. Advanced Micro Devices increased by 1% after the US chipmaker forecast faster growth through 2027, reassuring investors that demand for AI infrastructure remains robust. Brent crude oil futures LCOc1 declined nearly 9% to settle at $94.62 a barrel as investors balanced Washington's subsequent actions in negotiations to end conflicts in Ukraine and Iran against concerns that recent incidents in both conflicts may further disrupt supplies.

"Trump took us to war without any Congressional authorization, and this signals we'll get the situation in Iran under control," said Bill Strazzullo, chief market strategist at Bell Curve Trading. "The market is reacting to the fact that we'll have at least some oversight." As investors sought refuge, Treasuries rallied due to expectations of gridlock in Washington, which might curb government spending, coupled with potential AI regulation that could slow growth and diminish the necessity for interest rate hikes.

The yield on the benchmark 10-year US Treasury note fell 6.62 basis points on the day to 4.88%. The generally weaker dollar lifted the euro by 0.34% to $1.1231 and the pound 0.44% higher at $1.347. The yen and the Swiss franc, both safe-haven currencies, also experienced gains. The Swiss franc rose 0.49% against the dollar at 0.817 francs, while the Japanese yen strengthened by 0.16% to 158.4.

The dollar, which gauges the greenback against a basket of currencies, including the yen and the euro, slipped 0.23%. In cryptocurrencies, bitcoin increased by 3% to $80,164.99, while Ether climbed 5.6% to $2,421.84. Spot gold rose by 3.49% to $4,065.80 an ounce.