Live updates: Follow the latest news on US midterms
American stock futures and Asian equities tumbled along with the dollar as early results from the US midterm polls rippled through markets, threatening US President Donald Trump’s agenda as the Democratic party looked poised for a sweep.
Futures for the benchmark S&P 500 index slid 1.06 per cent, at 6.30am time, giving up an earlier 0.5 per cent advance, as early election results started rolling on Wednesday. Futures fell 1.9 per cent on the tech-heavy Nasdaq 100, and dipped 0.7 per cent on the Dow Jones index.
The US dollar fell against its group of 10 peers. While futures fell, US Treasuries benefited, with the yield on the benchmark 10-year Treasury note declining seven basis points to 4.89 per cent, according to Bloomberg data.
Stock-index futures slid amid investors concerns that Democratic control of the House and Senate would result in tighter regulations and closer scrutiny of the tech-heavy sectors, including artificial intelligence companies.
Treasuries, however, stand to gain as political haggling in Washington is bound to limit government spending, easing borrowing concerns.
“Early headlines and prediction markets are suggesting a rising probability of a blue wave,” Bloomberg quoted Andrew Ticehurst, a senior rates strategist at Nomura Holdings, as saying. “That scenario is generally regarded as being negative for the dollar and positive for US Treasuries. Markets are reacting consistently with that in early Asia trading.”
A blue wave in US politics refers to a large electoral victory for the Democratic Party, whose traditional political colour is blue.
Asian stocks
In Asia, equity benchmarks slid, reversing earlier gains and taking their cue from US stock futures.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5 per cent. South Korea's Kopsi slid 3.6 per cent, giving up its earlier gains of more than 3 per cent. Japan's Nikkei index fell 3.5 per cent, while the Hang Seng index in Hong Kong slipped 0.22 per cent. China’s Shanghai SE index also retreated by 0.21 per cent. Stocks in India are also set to open lower.
"Markets appear to be pricing in the possibility of a stronger-than-expected Democratic showing, which could reduce expectations for further fiscal stimulus," Reuters quoted Charu Chanana, chief investment strategist at Saxo in Singapore, as saying.
Historic sweep
Democrats were projected to win big in Tuesday's midterms, flipping both a Senate seat and a House of Representatives seat in North Carolina and picking up a governorship in Georgia.
As of 9.45pm Washington time, Democrats were projected to win 45 Senate seats compared to Republicans' 36, with 19 races still to be called, according to AP. Democrats have also flipped the North Carolina seat with a win by Roy Cooper. The party needs 51 seats to gain a majority.
The Democrats have also taken control of the US House of Representatives, CNN and CBS projected on Tuesday, in a momentous development that will reshape the course of Mr Trump's final two years in power.
The Democrats only needed to flip three Republican-held seats to take control of the chamber and initial results showed they had easily surpassed that threshold.
Control of the House means the Democratic will block Mr Trump's legislative agenda and open investigations into his administration's policies.
