Saudi stocks and Gulf markets opened higher on Wednesday, following the Republican Party's loss of control of the US Congress to the Democrats. Investors are awaiting whether this result will be reflected in the US administration’s directions and contribute to a decline in geopolitical risks, in light of the continuing war on Iran and regional tensions.
“TASI” rises 1.5%... and the Gulf markets rise
The main market index, TASI, rose by 1.52 percent, reaching 10,026 points, an increase of 150 points, exceeding the level of 10,000 points.
The Qatar Stock Exchange recorded the highest gains in the Gulf, with its index rising by 2.29 percent to 9,835 points, followed by the Dubai Financial Market by 2.25 percent to 5,942 points.
The Abu Dhabi Securities Market index also rose by 1.02 percent to 9,560 points.
The Muscat Market Index rose 0.70 percent to 7,273 points. The general market index of the Kuwait Stock Exchange rose 0.47 percent to 8,470 points.
The general index of the Bahrain Stock Exchange rose by 0.14 percent to 1,817 points.
Saudi blue chips rise
In terms of Saudi stocks, “Al Rajhi Bank” shares rose by 1.33 percent to 60.95 riyals, and “Saudi Aramco” shares rose by 0.31 percent to 26.24 riyals.
“Gas Holding” stock topped the list of rising stocks by 9.98 percent to 60.60 riyals, followed by “Amar” stock, rising by 9.96 percent to 42.16 riyals, then “CGS” stock by 9.84 percent to 6.14 riyals.
Flynas shares also rose by 3.26 percent to 40.58 riyals, despite the company’s net profits during the third quarter declining by 77.5 percent on an annual basis, to 27 million riyals ($7.2 million).
Bond yields in the euro zone largely stabilized on Wednesday, while their American counterparts fell, following the Democrats’ victory in control of the Senate and House of Representatives in the US midterm elections, as investors in Europe awaited the release of new data on inflation in the region.
The election results may have broad repercussions on sensitive market sectors and files, including the expansion of the establishment of artificial intelligence data centers, the financial expectations of the United States, defense spending, and regulations related to sectors such as health care, banking, and cryptocurrencies, according to Reuters.
Markets are also monitoring the possibility of a legislative stalemate between the administration of US President Donald Trump and the new Congress controlled by Democrats.
In commodity markets, Brent crude futures settled at $104.35 per barrel, after declining for two consecutive sessions, as investors awaited Washington’s next step in the US-Israeli war on Iran.
In debt markets, the ten-year German government bond yield settled at 3.3108 percent, while the ten-year US Treasury bond yield fell by 2.3 basis points to 4.927 percent.
Markets are awaiting the release of inflation data in the euro zone later Wednesday, amid expectations that it will rise in October compared to its level of 3.8 percent in September. Economists polled by Reuters expect the preliminary inflation reading to reach 4 percent in October.
The European Central Bank kept interest rates unchanged last week, but the possibility of raising them in December is increasing, as more monetary policy makers join the votes in support of this step.
German Central Bank President Joachim Nagel said on Tuesday evening that raising interest rates in December “seems absolutely necessary from today’s perspective.”
He added: “There appears to be little alternative to raising interest rates, unless inflation expectations improve significantly.”
Financial markets are currently pricing in about a 70 percent chance of raising interest rates in December.
In Germany, the yield on two-year government bonds, usually most affected by interest rate expectations, settled at 3.0167 percent.
The repercussions of the Democrats' victory in controlling both houses of the US Congress extended to global markets on Wednesday, with stocks and the dollar declining and Treasury bonds rising, amid expectations that the electoral results will limit President Donald Trump's ability to pass his political and economic agenda.
Standard & Poor's 500 futures fell by 0.3 percent, while Nasdaq 100 futures, which are dominated by technology stocks, fell by 0.4 percent. However, the losses reduced later as some investors entered to buy when prices fell.
The dollar fell against all major currencies in the Group of Ten, while the 10-year US Treasury bond yield fell 3 basis points to 4.93 percent. The MSCI Asia-Pacific stock index also fell by 0.2 percent.
Investors believe that the democratic wave may constitute a setback for stocks and the dollar, in light of the possibility of tightening regulatory oversight, especially over fast-growing technology and artificial intelligence companies. In contrast, Treasuries may benefit if political gridlock limits further tax cuts and government spending, alleviating concerns about federal borrowing.
The Democrats achieved victories in Republican strongholds across the country, and seized at least 6 seats in the Senate, in addition to winning seats in the House of Representatives in districts that Republicans had won easily in the 2024 elections. Several media organizations expected the Democrats to win the House of Representatives, while the “Design Desk HQ” website suggested that they would control the Senate.
Trump said that he could work with the House of Representatives and the Senate if they were under opposition control: “If the Democrats want to work with me.”
Chris Weston, head of research at Pepperstone Group, said that the blue wave, in itself, may not have been a surprise, but the size of the win was what surprised the markets. He added that the initial reaction was a sharp repricing of risks, amid the difficulty of determining the fair value of assets in sectors exposed to the impact of government policies.
However, the movements of US stocks and Treasury bonds on Wednesday represent only a limited decline from market trends since the beginning of the year. The Standard & Poor's 500 index is still up about 10 percent through 2026, while 10-year Treasury bond yields have increased by more than half a percentage point.
Stock losses diminished as some investors decided to buy after the initial declines. George Efstathopoulos, money manager at Fidelity International, said that the midterm elections, like any major political event, increased uncertainty and widened the gap between market assessments and economic fundamentals. He added that he had begun reducing his defensive positions, including utility stocks, to buy technology stocks in Asia and other markets, while increasing his exposure to India for diversification purposes.
Bonds and the dollar
Treasury bond yields declined across maturities with the announcement of the election results, and the largest decline was in 5-year bonds. Its yields fell by as much as 9 basis points to 4.67 percent.
Democratic control of the House of Representatives would reduce the chances of passing additional legislation that would increase the budget deficit under the Trump administration. Bond investors are concerned about the fiscal path of the United States, with public debt reaching about $40 trillion, and political stagnation may limit the risks of passing additional spending or tax cuts that would require issuing more Treasury bonds.
David Chao, global markets strategist at Invesco Asset Management, said that Democratic control of Congress will make it more difficult for the US administration to pass major legislation of a partisan nature. He added that the decline in fiscal stimulus may limit upward pressures on growth, inflation, and US Treasury bond yields.
In currency markets, the Swiss franc led currency gains against the dollar, rising by 0.5 percent, while the yen and euro rose by 0.4 percent each.
David Forster, chief strategist at Credit Agricole CIB in Singapore, said that the dollar’s fundamental weakness has become more apparent, in light of its performance being linked to the artificial intelligence boom. He added that a wave of democracy may hinder the expansion of the establishment of data centers and limit the prosperity of artificial intelligence, which may put pressure on the US currency.
In Asia, the South Korean KOSPI index witnessed volatile trading. It rose as much as 3.2 percent shortly after the opening, before falling by 4 percent, then rising again to erase its losses.
Bitcoin also fell by up to 2.8 percent, amid fears that Democratic control would disrupt legislation supported by the cryptocurrency sector, and tighten oversight of digital asset companies, before the currency later erases all its losses.
Corporate movements
On the corporate level, AMD provided sales forecasts that exceeded analysts' estimates by a large margin, an indication of the strong demand for data center processors used in artificial intelligence applications.
Super Micro Computer also expected revenues for the current quarter to exceed market estimates, and raised its annual sales expectations, reflecting continued strong demand for its servers equipped with artificial intelligence chips.
Meta Platforms raised $15 billion through the offering of dollar-denominated bonds, amid strong demand from investors, joining major technology companies that offer relatively high returns to attract buyers, at a time when investors are increasingly skeptical about the size of the sector’s investments in artificial intelligence.
In the chip sector, Nexperia filed a lawsuit against its owner, WingTech Technology, demanding compensation exceeding two billion dollars, in an escalation of the dispute between the company’s operations in China and its global management.
Japan Investment Corp., which is backed by the Japanese government, is also in talks to sell GSR, which specializes in chip-making materials, to Mitsui Chemicals, in a deal that could be worth more than 1.3 trillion yen ($8.2 billion), according to what Reuters reported, citing two informed sources.
