The first results of the mid-term elections in the United States, which point to gains by the Democratic Party and reinforce the prospect of political blockages in the event of a swing in Congress, are causing the dollar to stumble against the major currencies and the stock markets to decline on Wednesday in Asia.
Dollar decline
Around 02:10 GMT, the greenback lost 0.53% against the Japanese currency at 157.86 yen per dollar, and 0.40% against the common European currency at 1.1238 euros per dollar. The first results of the mid-term elections in the United States point to a sanction vote on Tuesday against Donald Trump: while the Democrats hope with these elections to restrict the powers of the Republican president, they managed to swing a first seat in the Senate early in the evening with the victory of Roy Cooper in North Carolina.
For the markets, it is “the scale of this “blue wave” that counts (...) the distinction between a narrow Democratic majority and a landslide victory is crucial,” underlines Chris Weston, analyst at broker Pepperstone. “A major Democratic victory, on the other hand, could force markets to reassess Donald Trump's remaining political program (...). Democratic control of Congress would increase the risks of legislative blockage, budgetary standoffs, conflicts over the debt ceiling and parliamentary investigations,” he warns.
Thus, “a Democratic victory in the House and the Senate would probably have a slightly positive effect on Asian currencies: an increased budgetary blockage would reduce expectations of a new American budgetary expansion, which would weigh on American bond yields and the dollar”, adds Lin Li, of the MUFG bank. “Conversely, a Democratic-majority House and Republican Senate would also imply divided government, but with less perceived constraint on the Republican and Donald Trump policy agenda,” which would result in “a weaker negative reaction on the dollar.”
In Tokyo, the flagship Nikkei index dropped 3.17% to 61,079 points. In Seoul, the flagship Kospi index dropped 1.59%. Taipei lost 0.28%, Sydney 0.51% and the Hong Kong Hang Seng index 0.36%. The stock markets stumbled in unison with the dollar following the first results of the American elections, notably pulled down by a sharp decline in tech stocks linked to chips for artificial intelligence (AI). The South Korean memory chip giants Samsung Electronics (-1.71%) and SK hynix (-3.22%) like the Taiwanese advanced semiconductor juggernaut (-0.22%) fell together.
“World stock markets have already begun to integrate the idea that a Democratic advantage (in the US Congress) would create headwinds for actions linked to AI,” commented Masahiro Yamaguchi, of SMBC Trust Bank, quoted by the Bloomberg agency, at the end of a campaign marked in particular by debates on the establishment of data centers. In Japan, the day after a public holiday, “we observe a delayed unwinding of positions linked to AI, echoing similar movements on foreign markets,” adds Mr. Yamaguchi.
Oil decline
Oil prices continued to lose ground, with markets continuing to believe in the prospect of negotiations between Tehran and Washington despite new American strikes. Around 02:15 GMT, the price of a barrel of Brent from the North Sea, the world market benchmark, fell 0.47% to $103.12 and that of a barrel of North American WTI fell 0.75% to $95.37. Donald Trump wrote on his Truth Social platform on Tuesday: “Oil prices are plummeting (...) because people feel there will be no war with Iran. Iran wants a deal, as quickly as possible. This could happen!”
