Wednesday 14 November 2018

US midterms result lifts global markets

World stocks rose yesterday, with Wall Street surging after the US midterm election divided control of Congress, but the outcome, which casts doubt on further US tax cuts, hit the dollar and sent Treasury yields lower. (stock picture)
World stocks rose yesterday, with Wall Street surging after the US midterm election divided control of Congress, but the outcome, which casts doubt on further US tax cuts, hit the dollar and sent Treasury yields lower. (stock picture)

World stocks rose yesterday, with Wall Street surging after the US midterm election divided control of Congress, but the outcome, which casts doubt on further US tax cuts, hit the dollar and sent Treasury yields lower.

The Democrats looked to be headed for a gain of more than 30 seats in the House of Representatives, well beyond the 23 they needed to claim their first majority in eight years. With President Donald Trump's Republican party holding onto its Senate majority, the results from Tuesday's election were in line with expectations.

While gridlock in Washington could hamper Mr Trump's political and economic agenda, few expect a reversal of tax cuts and financial deregulation measures that have already been enacted.

That view helped all three Wall Street equity indices open stronger. The Dow Jones Industrial Average rose 213.04 points, or 0.83pc, to 25,848.05, the S&P 500 gained 27.55 points, or 1pc, to 2,783 and the Nasdaq Composite added 84.49 points, or 1.15pc, to 7,460.45.

"The good news in a way for markets is that there was an uncertainty that's now been removed. We know where we stand for the next two years, and investors will focus back on the fundamentals, which are earnings growth and the economy," said Guy Miller, chief market strategist at Zurich Insurance Group.

Still, a split Congress could hamper Mr Trump's push for a further round of tax cuts and deregulation that have turbocharged the US economy, stock markets and the dollar.

After volatile Asian trade, where stocks and the dollar swung on the Republicans' fluctuating prospects, the pan-European STOXX 600 index rose 1.02pc and MSCI's gauge of stocks across the globe gained 0.90pc.

It was the seventh straight day of gains in global shares.

Riskier European bonds such as those from Italy also were in demand, with yields falling 6-9 basis points.

The US Fed is expected to signal this week that an interest rate rise remains on the agenda for December.

"It is now unlikely we will see additional fiscal stimulus in the near-term, that's a profound change but there will be no repeal of what's already in place," Mr Miller said.

Reuters

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