Wednesday , September 28 2022

Wall Street futures, Asian stocks are losing momentum when Democrats win House


Wall Street futures and Asian shares lost pair on Wednesday after the Democrats gained control of the United States House of Representatives, supporting the party's ability to block the political and economic agenda of President Donald Trump.

However, European stocks are expected to grow, with British investors looking at gains of up to 0.5 percent in the British FTSE, 0.8 percent in the French CAC and 0.7 percent in the German DAX.

The Democrats' victory in the house creates an obstacle for Republicans to easily pass through legislation through both Chambers of Congress, thereby exacerbating the outlook for some of Trump's key economic proposals.

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Most American broadcasters assumed that the Democrats would gain at least 25 seats, out of the 23, who needed eight years to demand their first majority in Parliament, while Republicans were seen when they had several seats in the Senate.

Related: Democrats have taken control of the House as Republicans holding the Senate

Read more: Key rounds since the US elections in 2018

While both results were broadly in line with market expectations, the reason why markets were not sold, the prospect of political seizure creates some uncertainty for investors. The dollar has weakened against most of its major counterparts.

"In the short term, Republican loss in parliament should increase the volatility of risky markets, aggravate positive sentiment, and be positive for US rates," said Ed Al-Hussain, senior and monetary analyst at Columbia Threadneedle Investments in Minneapolis, United States.

"Long dollar and short treasury futures are relatively stretching to the present day and could exaggerate short-term movements at these prices," he added.

In addition, newly-empowered Democrats House will be able to investigate Trump's tax returns, possible business conflicts of interest and allegations concerning the campaign links in 2016 to Russia.

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Shares in futures on S & P500 trades were 0.1 percent higher, and the largest MSCI index in Asia-Pacific shares outside Japan increased by a similar amount but was far farther.

Japanese company Nikkei ended 0.3 percent and lost morning gains.

"It was obviously difficult for the Republics to pass additional tax cuts or Dodd-Frank amendments (on financial institutions)," said Tomoaki Shishido, an analyst at Nomura Securities.

The mood of the market was volatile in Asian stock trading, and the dollar rocked on the Republican fluctuating prospect of house retention.

While a split congress would hamper the Trump program, such as tax cuts or deregulation, some investors believe the Democrats may agree with higher spending.

"There are still areas of compromise on spending, and so with the divided government, I expect further fiscal stimuli. There is some possibility of compromise on infrastructure spending," said Steve Friedman, senior economist at New York at BNP Paribas Asset Management.

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"If there are other fiscal stimuli, it suggests that fiscal policy is rather beneficial to US growth and equities should be promoted."

On the other hand, many investors expect that Trump will continue to have a fixed line of tariffs that can be imposed without the approval of Congress and foreign policy.

This keeps alive worries about the trade war between China and the United States.

Trump's cumulative tax cuts in December and a spending agreement reached in February in Congress helped lift the US economy but also broaden the federal budget deficit.

As a result, the Treasury stock grew, increasing US bond yields.

The result of the election shifted the ten-year US Treasury yield by 2.5 basis points to 3.189 percent, of which the 7-year maximum of 3.261 percent affected a month ago.

The debt market, however, also remains under pressure from the record volume of debt debt this week.

In the currency market, the dollar submerged.

Against that, it was 0.3 percent lower at 113.13, which accelerated past profits to a monthly maximum of 113.82 yen.

The euro rose 0.15 percent to $ 1.1446 and the British pound increased by 0.1 percent to $ 1.3117, reaching a three-week high.

Sterling prolonged the profits made yesterday in hopes of breaking Brexit when Brexit Secretary Dominic Raab said "Thumbs Up" on a journey outside the government meeting.

This helped the Sterling to gain losses on the basis of comments from an older member of the North Democratic Unionist Party before Britain seemed to have stepped out of the EU without an agreement.

Crude oil prices were soft after a 2% drop on the previous day. Gross futures on the US market reached an eight-month decline when Washington granted sanctions to the best buyers of Iraqi oil, and Iran said it had so far sold as much oil as it needed.

Negative futures on the US West Texas Intermediate (WTI) traded by 0.6 percent less, while $ 61.85 a barrel recorded the lowest price on Tuesday at $ 61.31, the lowest price since March 16.

Brent International futures fell 0.25 percent to 71.95 USD after reaching a low of 71.18 USD on Tuesday, the lowest since August 16th.

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