Crude oil prices and the US dollar fell on Wednesday as investors reacted to the Republican Party’s heavy losses in the United States midterm elections.
The election outcome, which saw Democrats take control of both chambers of Congress, raised concerns among investors about possible political gridlock and uncertainty over President Donald Trump’s policy direction.
The Democrats’ victory gives them the power to block legislation, launch investigations into the Trump administration and frustrate some judicial and senior government appointments.
“Investors are trying to get their heads around what a Democrat landslide means for financial markets,” Russ Mould, investment director at AJ Bell, said.
He added that uncertainty over how Trump might respond to the result could pose a risk to financial markets in the coming months.
The US dollar weakened against major currencies amid concerns that the election outcome could trigger political deadlock, particularly after Trump warned that he would become “Mr Veto”.
Technology stocks also came under pressure following suggestions that Democrats could prioritise tighter regulation of artificial intelligence.
However, European stock markets recorded gains during Wednesday morning trading, with London, Frankfurt and Paris rising by more than one per cent.
The gains came despite official data showing that eurozone inflation had reached a three-year high of 4.0 per cent.
Asian markets also recorded a largely positive performance, although Tokyo closed lower as technology stocks struggled.
The midterm elections, which drew tens of millions of voters, were widely viewed as a referendum on Trump’s leadership amid public concerns over rising petrol prices, the impact of tariffs and the Iran war.
Chris Weston, an analyst at Pepperstone, said Trump retained considerable executive authority, making the potential consequences of the election result difficult to predict.
Bond yields remained relatively stable, while gold benefited from increased demand for safe-haven investments.
Beyond the US election, investors continued to monitor third-quarter corporate earnings and business developments.
German automaker BMW announced plans to increase its planned job cuts after reporting a decline in third-quarter profits, citing intense competition and falling demand in China.
Google also disclosed plans to invest $15bn in Malaysia over the next two years to develop data centres and other infrastructure.
Market figures
At about 11:30 GMT on Wednesday, the major market indices and commodity prices were as follows:
– London FTSE 100 rose 1.2 per cent to 10,765.27 points.
– Paris CAC 40 gained 1.5 per cent to 8,137.66 points.
– Frankfurt DAX increased 1.5 per cent to 26,249.32 points.
– Tokyo Nikkei 225 fell 1.4 per cent to 62,188.63 points at closing.
– Hong Kong Hang Seng Index rose 1.7 per cent to 23,919.50 points.
– Shanghai Composite gained 2.2 per cent to 3,686.17 points.
In the oil market, Brent crude fell 1.2 per cent to $102.36 per barrel, while US West Texas Intermediate dropped 0.8 per cent to $95.42 per barrel.
In currency trading, the euro rose to $1.1243 from $1.1191 on Tuesday, while the pound increased to $1.3475 from $1.3413.
The dollar also weakened against the Japanese yen, trading at 158.54 yen compared with 158.75 yen previously.
