Copper declines as risk aversion continues and anticipation of the results of the US midterm elections

Copper declined during Wednesday's trading, with the continuation of the wave of risk aversion that prevailed in the markets the previous day, coinciding with the successive release of the results of the US midterm elections.

Standard 3-month copper contracts on the London Metal Exchange fell by 0.99 percent to $13,897 per ton, by 03:00 GMT, after touching in Tuesday’s trading the level of $13,883, the lowest since August 19, according to Reuters.

On the Shanghai Futures Exchange, the most actively traded copper contract fell by 0.81 percent to 107,230 yuan ($16,076.22) per ton.

Markets are closely awaiting the election results, in light of their potential repercussions on US financial policy, regulation of the artificial intelligence sector, and the conflict between the United States and Iran.

Democrats made early gains in the Senate elections, raising bets that they could seize control of the Senate from Republicans led by President Donald Trump, despite continued uncertainty about the final result.

In Asia, Japan's Nikkei and South Korea's Kospi, which are heavy on technology stocks, fell sharply on Wednesday, amid fears that Democrats' gains will slow spending on artificial intelligence infrastructure.

“Copper is a key metal in infrastructure development and has risen in tandem with AI stocks over the past 12 months,” Daniel Haynes, chief commodities strategist at ANZ Bank, said in a note.

Supply constraints limit losses

On the other hand, the scarcity of supplies outside the United States contributed to limiting the metal’s losses. In China, the world's largest copper consumer, the copper price premium at Yangshan Port, an indicator of demand for imported copper, settled at $200 per ton, near its highest levels in more than a decade.

Potential tariffs on US imports of refined copper have contributed to attracting quantities of the metal to its warehouses, leading to a decrease in available stocks in other markets.

Barbara Lambrecht, commodities analyst at Commerzbank, said in a note based on IHS Markit data that the United States imported 207,000 tons of copper during October, which is the second highest monthly import volume this year.

In terms of other metals traded on the London Metal Exchange, aluminum fell by 0.48 percent, zinc by 0.22 percent, lead by 0.27 percent, and nickel by 0.24 percent, while tin fell by 2.6 percent.

On the Shanghai Stock Exchange, aluminum fell by 0.45 percent, zinc by 0.47 percent, lead by 0.88 percent, and nickel by 0.81 percent, while tin fell by 4.5 percent.

The cryptocurrency Bitcoin fell to its lowest levels in seven weeks, with the increasing possibility of Democrats controlling both chambers of the US Congress, according to the preliminary results of the midterm elections, which added more political uncertainty to a market already suffering from weak investor appetite.

The largest cryptocurrencies in terms of market value fell by up to 2.8 percent to $75,630.57 during Asian trading on Wednesday, which is its lowest level since September 17. The currency trimmed some of its losses to trade at about $76,600 by 12:20 p.m. in Singapore, according to Bloomberg.

This decline coincided with a decline in US stock futures and the dollar, while Treasury bonds rose, amid expectations that Democratic control of Congress will lead to a state of political stalemate in Washington.

Daniel Reyes-Faria, CEO of Zero Stack, said that markets are reacting to change, and that the shift to Democratic control may add more uncertainty to the sector, given the party’s historical position that tends to impose supervisory restrictions on cryptocurrencies, but he expected that the uncertainty would be temporary.

Major cryptocurrencies began to decline with the emergence of the initial election results. It was expected that the Democrats would seize control of the House of Representatives, as indicated by initial expectations, and they also became candidates to win the Senate majority.

Digital asset companies have pumped large sums of money to influence the political scene since US President Donald Trump ran for a second presidential term in 2024. According to Public Citizen, a consumer rights organization, cryptocurrency companies provided $189 million to political action committees during the 2026 midterm election cycle until the end of the first quarter, amounting to more than a third of total electoral spending.

The immediate concern for investors is that Democratic control could disrupt legislation supporting the sector and impose tighter oversight on digital asset companies. The broader economic repercussions are still less clear. Political stagnation may limit any additional fiscal stimulus and put pressure on risk assets, while lower Treasury yields could provide subsequent support to the market by easing financial conditions.

Accumulated pressure

Bitcoin's movements at the present time do not necessarily reflect trends in market sentiment in general, as the cryptocurrency market is facing the repercussions of the hacking of the Binance platform, the largest cryptocurrency trading platform, which caused losses amounting to $6.3 billion last week, in addition to the decline in the enthusiasm of individual investors with the escalation of interest in artificial intelligence.

These pressures make it difficult to separate the impact of broader economic and political developments from the issues specific to the digital asset sector, which are weighing on the market.

Damian Lu, chief investment officer at Ericssons Capital, said that cryptocurrency market sentiment currently reflects a moderate level of fear in the near term, offset by a great deal of uncertainty in the long term. He attributed the current pressures to the association of cryptocurrencies with high-risk assets in general, coinciding with the wave of selling of technology stocks and the possibility of resuming the war in the Middle East.

Democratic control of the Senate, along with the House of Representatives, would put Congress in a confrontation with the Republican-controlled White House led by Trump. The financial gains made by the Trump family from their projects in the cryptocurrency sector have become a subject of controversy during the current year, and have contributed to disrupting a draft regulatory law that is considered important for the future of the sector.

Rachel Lucas, an analyst at BTC Markets, said that the Clarity bill to regulate digital assets, which is already stalled in the Senate, may need to be renegotiated if control of the committees changes, instead of being quickly revived, noting that the markets have largely taken this possibility into account.

Bitcoin fell by about 6 percent compared to the highest level it recorded last Thursday, before the Binance hack. Outflows of more than $1 billion were also recorded from US-listed Bitcoin exchange-traded funds on Friday and Monday.

In the options market, demand for hedging instruments continued to decline across different maturities, although open positions were still leaning towards call options in a number of the largest contracts.

Sean McNulty, a derivatives trader at AQC Tech, said that clients have shifted from buying options to bet on Bitcoin's rise to buying options to protect against its decline, as the chances of Democrats winning a majority in Congress increase. He added that investor interest has returned to interest rates and currencies, which is also putting pressure on Bitcoin.

The US dollar fell sharply against major currencies, on Wednesday, with the emergence of the initial results of the US midterm elections, which showed strong progress for the Democrats in their efforts to seize control of Congress from the Republicans led by President Donald Trump.

Investors reacted quickly, as they tended to sell stocks and the dollar, and search for safe havens in US Treasury bonds, amid fears of the potential political and economic repercussions of the shift in the balance of control in Congress.

The euro rose 0.5 percent to $1.1249, and the Japanese yen rose 0.7 percent to 157.63 yen to the dollar. On the other hand, the dollar index, which measures the performance of the US currency against a basket of six major currencies, fell by 0.3 percent to 101.4 points.

Some electoral results reflected the magnitude of the shift in the political mood, as Democrat Annie Andrews won the South Carolina Senate seat, in an electoral surprise against Republican Darlene Graham, even though Trump had won the state by a margin of nearly 18 percentage points two years ago.

With Andrews' victory, along with the victory of Democrat Roy Cooper in the North Carolina Senate race, the party now has two seats out of four net seats it needs to seize the majority in the House, while final control of Congress remains undecided.

Expectations markets showed rising bets on the possibility of Democrats controlling both chambers of Congress.

Carol Kong, currency strategist at Commonwealth Bank of Australia, said the dollar may be under further pressure, because Democratic control of Congress may limit government spending during the remainder of Trump's term.

She added that investors are also monitoring the risks of escalation in the Middle East depending on the election results, noting that the Republicans' loss of control of the House of Representatives and the Senate may raise questions about the steps that Trump may take.

She noted that Trump had previously indicated the possibility of resuming the bombing campaign on Iran after the elections, warning that any military escalation could push oil prices to rise sharply, which would support the dollar.

Oil prices fell slightly to $103.34 per barrel on Wednesday, after falling by about 1 percent in the previous session, recording their lowest levels in about four weeks.

Artificial intelligence concerns

In another reading of the dollar’s movements, analysts believe that the repercussions of the elections on the artificial intelligence sector represent an important factor in explaining the pressures on the US currency, with increasing fears of tightening regulatory control over technology companies and data center projects.

Moh Seong Sim, currency strategist at OCBC Bank, said that market movements are consistent with fears of increased regulatory scrutiny of the artificial intelligence sector if Democrats control Congress, which was reflected in the weaker performance of the Nasdaq index and fears of the impact of potential restrictions on the growth of the US economy.

But he pointed out that passing legislation at the federal level will remain difficult even if Democrats control both chambers, in light of the legislative obstacles and Trump’s veto power.

In other currency markets, the pound sterling rose by 0.4 percent to $1.3460, as investors awaited the Bank of England’s decision on monetary policy on Thursday, amid expectations of raising interest rates for the first time since August 2023.

The dollar also fell against the Swiss franc by 0.9 percent to 0.8133 francs.

In China, the yuan traded outside the mainland fell by 0.1 percent to 6.6782 yuan to the dollar, continuing its losses after recording the largest daily decline since May 15 on Tuesday, following the decision of the People’s Bank of China to raise the percentage of reserves required from financial institutions in foreign currencies, in a move aimed at slowing the rise of the yuan.