US midterms: the Dem result and the prospects for AI, oil and duties

The basic scenario predicted a victory for the Democrats, but the scale of the success offers the markets several elements to metabolize. Such a clear outcome helps ensure an orderly transition, as the risk of contesting the outcome is limited. Trump seems intent on accepting the result and the new Congress should take office in January. It also avoids a political stalemate, with Congress divided between Democrats and Republicans. All these elements of relative stability should favor market sentiment.

On the other hand, the Democrats' victory must also be seen in the context of the current nervousness related to artificial intelligence on the stock markets. Data centers have been a major focus of this election, with Democrats taking a tougher stance on the government's free-market approach to the AI ​​sector. Given that a significant portion of US growth now depends on the AI ​​boom, more restrictive policies could become a brake on this growth. This is unlikely to result in any major changes in the short term, but it is certainly a trend worth keeping an eye on.

With Trump still at the helm of foreign policy, inflation remains a rather unpredictable variable. The war with Iran is not over and the price of oil barely moved after the election results. Tariffs could make a comeback as one of Trump's favorite economic policy tools. Markets are sensitive to any inflationary surprises in the data, and if further uncertainty is added on the price front, we could easily see rates rise again. Implied volatility measures suggest preparing for significant rate movements in the coming months.

The events of Wednesday 4 November and the view on the markets

The main data of the day in the Eurozone is the flash estimate of the consumer price index for October. With most countries having already released their data, overall inflation is expected to rise to 4%. The core rate should instead remain stable at 2.5%. Data continues to point to a further rate hike by the ECB in December. The ECB will publish its wage indicator, while speeches are expected from chief economist Lane and Frenchman Moulin.

In the United States, the ISM services index will be published, expected to decline slightly to 54.8. Ahead of official US labor market data on Friday, markets will also be closely watching ADP employment change data. The day's calendar will be completed by the trade balance and data on imports and exports.