Global markets rebounded this afternoon as investors assessed the Democrats’ election victory in the US, although Elon Musk emerged among the biggest losers as shares in SpaceX and Tesla fell.
Stocks dropped on Tuesday evening as traders bet that Democratic control of both the Senate and House of Representatives could slow the expansion of artificial intelligence businesses.
However, the prospect of increased political gridlock, potentially limiting President Donald Trump’s volatile policymaking, lifted equities. The tech-heavy Nasdaq rose almost 2 per cent in early trading, while the S&P 500 gained 1.6 per cent.
The earlier sell-off also weighed on the dollar. The euro rose 0.39 per cent to $1.1237, while sterling gained 0.42 per cent to $1.3466, pushing the dollar index 0.34 per cent lower.
In bond markets, the yield on the two-year US Treasury fell 3.5 basis points overnight to 4.606 per cent before recovering to trade broadly flat by the afternoon. Gold, meanwhile, climbed 2.77 per cent to $4,036.
Technology shares remained under close scrutiny, with SpaceX and Tesla both down more than 2 per cent in early trading. The AI boom has powered global markets in recent years, but further regulatory changes, alongside existing concerns about AI spending, could put additional pressure on stocks.
Global markets recovered as investors assessed the Democrats’ election victory in the US
Kit Rees, investment strategist at Quilter, said: ‘Technology stocks could come under pressure as a Democratic sweep raises concerns that the sector faces increased regulatory scrutiny, particularly over the expansion of data centres.
‘AI has been a powerful engine of the US economy, so any restrictions on its future development could threaten to slow growth.
‘It also creates a more challenging outlook for the world’s largest stock market, whose performance has become increasingly tied to whether this new technology can deliver meaningful returns.’
R J Gallo, chief investment officer of Global Fixed Income at Federated Hermes, added: ‘One important consequence of a blue wave across the House and Senate is likely to be a challenge to the unchecked expansion of AI – and we believe both chambers may now seek to restrain and regulate the technology at federal level.
‘There are also likely to be more supportive Democrats at state level, reinforcing any cooling effect.’
Across Asia, investors largely sold AI-related stocks, sending chipmakers Samsung and TSMC sharply lower. South Korea’s Kospi fell 3 per cent before ending the session higher, while Japan’s Nikkei declined 1.4 per cent.
The FTSE 100, which has relatively little exposure to technology, surged more than 200 points, or 1.94 per cent, to 10,843.
French and German markets also advanced strongly, with their benchmark indices rising 2.23 per cent and 2.34 per cent respectively.
The election result, which saw Democrats make gains in areas traditionally viewed as conservative, could also affect the outlook for US government finances.
Charu Chanana of Saxo said: ‘Trump remains president, but a Congress controlled by Democrats would significantly restrict his legislative agenda, particularly on tax policy, fiscal stimulus and government spending.
‘Democrats would not have complete freedom to rewrite policy, however, because Trump retains veto power.
‘The most likely result is two years of political confrontation, stronger congressional oversight and legislative gridlock, rather than an immediate reversal of current policies.’
Oil prices continued to weaken, with Brent crude down 2.21 per cent at around $101 after hitting a four-week low on Tuesday.
Axel Rudolph, chief technical analyst at IG, said: ‘Oil is making a modest recovery as hopes of a diplomatic breakthrough between Washington and Tehran encounter familiar obstacles.
‘Both sides may be weighing fresh proposals, but Iran’s dissatisfaction with the US response, together with the latest military strikes, underlines how far away a deal remains.
‘Brent is still lower for the week, reflecting hopes that negotiations could eventually restore more reliable flows from the region. However, the risk premium is unlikely to disappear while the outcome remains so uncertain.’
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