Global Markets: World stocks rally as investors expect more political certainty after Democrats' win

Space Exploration Technologies

Wed 16:09

Updates headline and prices throughout with US markets open, adds analyst comment
Wall Street stocks jump following Democratic victory
Benchmark US 10-year Treasury yield falls
Dollar retreats, safe-haven gold rises
Crude prices fall 
By Chibuike Oguh and Amanda Cooper
NEW YORK/LONDON, Nov 4 (Reuters) - Global stocks rallied on Wednesday after Democrats seized control of both chambers of Congress in the US midterm elections, providing greater political clarity and reducing the uncertainty that has weighed on markets. 
     In a major setback to President Donald Trump, Democrats scored sweeping victories in Republican strongholds for the first time in generations. The breadth of the party's success was underscored by gains in districts long considered safely conservative, highlighting a political shift that may have caught some investors off guard.
On Wall Street, all three main indexes were trading higher with communication services, consumer discretionary and technology stocks driving gains. Energy shares were the biggest losers on the day with crude prices down 2% as Trump acknowledged that the Iran war had played a role in his party's sweeping defeat.
The Dow Jones Industrial Average .DJI rose 2.05%, the S&P 500 .SPX was up 1.72%, and the Nasdaq Composite .IXIC gained 2.46%.
"Markets hate uncertainty and even though a lot of what the result was had been priced in ahead of time, getting confirmation of that last night brings certainty to markets," said Clayton Allison, portfolio manager at Prime Capital Financial. "Now this brings questions as to what actually gets done in Washington over the next two years. But the markets love to see that there is a resolution to a catalyst event."
Opinion polls have shown Democratic voters favouring more control over AI, and investors expect the Democratic-controlled Congress to apply more scrutiny to the sector.
The MSCI All-World index .MIWD00000PUS was up 1.3%, while Europe's STOXX 600 .STOXX, which has acted as a hedge against AI-related risks, jumped 1.84% to two-month highs. 
AI stocks in Asia initially led a decline in equity markets before finishing higher overnight.  MSCI's broadest index of Asia-Pacific shares outside Japan .MISX00000PUS rose 0.33%.
The AI boom has helped propel global markets in recent years, driven by heavy spending from tech giants racing to build data centers and expand computing capacity. That has made investors acutely sensitive to anything that could derail the technology's rapid expansion.
     Advanced Micro Devices AMD.O rose 1% in early trading after the US chipmaker forecast faster growth through 2027, reassuring investors that demand for AI infrastructure remains strong.
        
SAFE HAVEN BID
Treasuries rallied as investors expect gridlock in Washington to cut government spending, with AI regulation also possibly slowing growth and reducing the need for rate hikes.
The yield on the benchmark US 10-year Treasury note US10YT=RR was down 0.44 basis point on the day at 4.95%, having fallen as much as 6 bps to a low of 4.89% overnight, which, in turn, weighed on the dollar =USD. 
The broadly weaker dollar left the euro EUR= up 0.40% at $1.1234 and the pound up 0.41% at $1.3469 GBP=.
The yen JPY= and the Swiss franc CHF= — both safe-haven currencies — also notched gains. The Swiss franc CHF= was up 0.35% against the dollar at 0.818 francs. The Japanese yen JPY= edged 0.07% higher to 158.61.
Brent crude oil futures LCOc1 were down 2.2% on the day at $101.27 a barrel as investors weighed Washington's next move in talks to end the wars in Ukraine and Iran against worries that recent attacks in both conflicts could further disrupt supplies.
In cryptocurrencies, bitcoin BTC= gained 3.49% to $80,553.92. Ethereum ETH= rose 6.2% to $2,434.83.
Spot gold XAU= rose 2.72% to $4,036.49 an ounce.
     

(Reporting by Chibuike Oguh in New York; Editing by Kirsten Donovan)
((Chibuike.oguh@thomsonreuters.com;))