Stock re­lief af­ter US midterms

The Phnom Penh Post - - BUSINESS -

STOCK mar­kets on both sides of the At­lantic charged higher on Wed­nes­day af­ter the US midterm elec­tions pro­duced no ma­jor sur­prises, trig­ger­ing a re­lief rally.

“Fi­nan­cial mar­kets are con­tin­u­ing their for­ward drive on the re­al­i­sa­tion that in­vestors were rightly po­si­tioned for the out­come of the midterm elec­tions,” said Jamel Ah­mad at FXTM.

The Democrats re­gained con­trol of the House of Rep­re­sen­ta­tives fol­low­ing Tues­day’s vote, but Pres­i­dent Don­ald Trump’s Repub­li­can party widened its ma­jor­ity in the Se­nate.

The dol­lar, how­ever, slid against main ri­vals as in­vestors ex­pected Demo­cratic con­trol of the House to be “a po­ten­tial road­block” to any Trump ef­fort to in­tro­duce fur­ther fis­cal stim­u­lus, Ah­mad said.

While the elec­tion re­sults were broadly in line with fore­casts – with some no­table up­sets and near up­sets in the de­tails – the out­come means Trump faces a tough two years be­fore his 2020 re-elec­tion bid, with Democrats ap­pear­ing ready to fight against his tax­cut­ting, dereg­u­la­tion agenda while boost­ing over­sight of the ad­min­is­tra­tion and Trump him­self.

Wall Street’s top three stock indices all fin­ished solidly higher. Pa­trick O’Hare at Brief­ing.com said the rise in stocks “likely speaks to the re­lief that the elec­tion is done and that the over­all re­sult went as ex­pected.”

And the ab­sence of ma­jor sur­prises “has re­moved an el­e­ment of un­cer­tainty, which has added to mar­ket volatil­ity in re­cent weeks.”

The broad-based re­cov­ery in Euro­pean stock mar­kets sug­gests that “in­vestors are hop­ing that a split Congress will mark the end of Trump’s pro­tec­tion­ist agenda, as least as far as Europe is con­cerned”, said Si­mona Gam­barini at Cap­i­tal Eco­nom­ics.

Other an­a­lysts pointed to the con­se­quences of the power di­vide.

“The split Congress means that there is more likely to be grid­lock, which will sig­nifi- cantly cur­tail [Trump’s] leg­isla­tive agenda,” said ING chief in­ter­na­tional econ­o­mist James Knight­ley.

Re­lief rally

While he pointed out that the two sides could pos­si­bly work to­gether in ar­eas such as in­fra­struc­ture spend­ing, he said “for the most part di­vi­sions be­tween and within the par­ties mean that progress will be dif­fi­cult.”

The re­sult also could mean lower pres­sure on the Fed­eral Re­serve to raise US in­ter­est rates more ag­gres­sively, tak­ing some heat out of the dol­lar.

The cen­tral bank’s drive to tighten bor­row­ing costs to off­set a resur­gent US econ­omy has weighed on global stock mar­kets in re­cent weeks.

Nader Naeimi, head of dy­namic mar­kets at AMP Cap­i­tal In­vestors in Syd­ney, saw the elec­tions re­sult as a “good out­come” for the world econ­omy.

“When you look at . . . the ex­pec­ta­tions of more fis­cal spend­ing in the US adding to more pres­sure on debt and debt is­suance, hav­ing a split govern­ment now with more checks and bal­ances is ac­tu­ally a pos­i­tive set-up for mar­kets.”

Ear­lier in Asia, the tone was some­what less up­beat given the over­hang of US-China trade war fears. Hong Kong’s main stocks in­dex fin­ished 0.1 per cent higher af­ter swing­ing through the day, while Shang­hai ended 0.7 per cent down and Tokyo shed 0.3 per cent. Syd­ney added 0.4 per cent.

MANDEL NGAN/AFP

A woman passes in front of the US Capi­tol in Wash­ing­ton, Dis­trict of Columbia, on Novem­ber 6 as Amer­i­cans started vot­ing in mid-term elec­tions.

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