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US, Europe stocks enjoy relief rally after midterm vote
NEW YORK, Nov 8, 2018 (BSS/AFP) – Stock markets on both sides of the
Atlantic charged higher Wednesday after the US midterm elections produced no
major surprises, triggering a relief rally.
“Financial markets are continuing their forward drive on the realization
that investors were rightly positioned for the outcome of the midterm
elections,” said Jamel Ahmad at FXTM.
The Democrats regained control of the House of Representatives following
Tuesday’s vote, but President Donald Trump’s Republican party widened its
majority in the Senate.
The dollar, however, slid against main rivals as investors expected
Democratic control of the House to be “a potential roadblock” to any Trump
effort to introduce further fiscal stimulus, Ahmad said.
While the election results were broadly in line with forecasts — with
some notable upsets and near upsets in the details — the outcome means Trump
faces a tough two years before his 2020 re-election bid, with Democrats
appearing ready to fight against his tax-cutting, deregulation agenda while
boosting oversight of the administration and Trump himself.
– Relief rally –
Wall Street’s top three stock indices all finished solidly higher.
Patrick O’Hare at Briefing.com said the rise in stocks “likely speaks to
the relief that the election is done and that the overall result went as
expected.”
And the absence of major surprises “has removed an element of uncertainty,
which has added to market volatility in recent weeks.”
The broad-based recovery in European stock markets suggests that
“investors are hoping that a split Congress will mark the end of Trump’s
protectionist agenda, as least as far as Europe is concerned”, said Simona
Gambarini at Capital Economics.
Other analysts pointed to the consequences of the power divide.
“The split Congress means that there is more likely to be gridlock, which
will significantly curtail (Trump’s) legislative agenda,” said James
Knightley, chief international economist at ING.
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While he pointed out that the two sides could possibly work together in
areas such as infrastructure spending, he said “for the most part divisions
between and within the parties mean that progress will be difficult.”
The result also could mean lower pressure on the Federal Reserve to raise
US interest rates more aggressively, taking some heat out of the dollar.
The central bank’s drive to tighten borrowing costs to offset a resurgent
US economy has weighed on global stock markets in recent weeks.
Nader Naeimi, head of dynamic markets at AMP Capital Investors in Sydney,
saw the elections result as a “good outcome” for the world economy.
– Doubling down on tariffs –
“When you look at… the expectations of more fiscal spending in the US
adding to more pressure on debt and debt issuance, having a split government
now with more checks and balances is actually a positive set-up for markets.”
Earlier in Asia, the tone was somewhat less upbeat given the overhang of
US-China trade war fears. Hong Kong’s main stocks index finished 0.1 percent
higher after swinging through the day, while Shanghai ended 0.7 percent down
and Tokyo shed 0.3 percent. Sydney added 0.4 percent.
Neil Wilson, chief market analyst at Markets.com, said that Trump’s long-
running trade war with China would be unlikely to be affected by the vote
outcome, meaning tariffs will continue, squeezing US consumers and farmers.
“A split Congress will, in all likelihood, not stop Trump from doubling
down on tariffs with China. This could result in us getting all the anti-
growth measures of Trump without more of the pro-growth reforms,” he argued.
– Key figures around 2200 GMT –
New York – Dow: UP 2.1 percent at 26,180.30 points (close)
New York – S&P 500: UP 2.1 percent at 2,813.89 (close)
New York – Nasdaq: UP 2.6 percent at 7,570.75 (close)
London – FTSE 100: UP 1.1 percent at 7,117.28 (close)
Frankfurt – DAX 30: UP 0.8 percent at 11,579.10 (close)
Paris – CAC 40: UP 1.2 percent at 5,137.94 (close)
EURO STOXX 50: UP 1.2 percent at 3,246.16 (close)
Tokyo – Nikkei 225: DOWN 0.3 percent at 22,085.80 (close)
Hong Kong – Hang Seng: UP 0.1 percent at 26,147.69 (close)
Shanghai – Composite: DOWN 0.7 percent at 2,641.34 (close)
Euro/dollar: UP at $1.1434 from $1.1416 at 2120 GMT
Pound/dollar: UP at $1.3130 from $1.3097
Dollar/yen: UP at 113.53 yen from 113.46 yen
Oil – Brent Crude: DOWN 6 cents at $72.92 per barrel
Oil – West Texas Intermediate: DOWN 54 cents at $61.67
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