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Global Markets: Stocks hold gains, dollar weaker as Democrats win U.S. House

Reuters  |  TOKYO 

By Hideyuki Sano

TOKYO (Reuters) - Wall Street stock futures and Asian shares held earlier gains on Wednesday after Democrats won control of the U.S. House of Representatives, boosting the party's ability to block Donald Trump's political and economic agenda.

The Democrats' House win creates a clear hurdle for Republicans to easily pass legislation through both chambers of Congress, clouding the outlook for some of Trump's key economic proposals.

In Asian trade, major broadcasters projected the Democrats would wrest House control, while the Republicans were seen retaining the

While both outcomes were broadly in line with market expectations, a reason markets did not sell off, the prospect of political gridlock creates some uncertainty for investors. The dollar weakened against most of its major counterparts.

In equities markets, U.S. S&P500 futures rose 0.3 percent, MSCI's broadest index of shares outside rose 0.3 percent and Japan's Nikkei gained 1.2 percent.

"It has clearly become difficult for Republicans to pass additional tax hikes or amendments to Dodd-Frank regulations (on financial institutions) for instance," said Tomoaki Shishido, at

Investor sentiment had been volatile in Asian trade with stocks and the dollar swinging on the Republicans' fluctuating prospects of retaining the House.

While a split would put a brake on Trump's agenda, such as tax cuts or deregulation, some investors think the Democrats may agree to more spending.

"There are still areas with compromise for spending, so even with a split government I expect more fiscal stimulus ahead. There is some possibility for compromise on infrastructure spending as well," said Steve Friedman, New York-based at

"If there is additional fiscal stimulus, it suggests that fiscal policy is more of a tailwind for U.S. growth and it should, all things equal, be supportive for stocks."

On the other hand, many investors also expect Trump to continue to take a hard line on tariffs, which he can impose without Congressional approval. That keeps alive worries about a trade war between and the

Trump's massive tax cut, enacted in December, and a spending agreement reached in February have helped lift the U.S. economy, but they have also widened U.S. federal budget deficit.

As a result, Treasury supply has been growing, pushing U.S. bond yields higher.

The election results pushed down the 10-year U.S. Treasuries yield about 2 basis points to 3.193 percent, off its seven-year high of 3.261 percent touched a month ago. But the debt market also remains under pressure from this week's record volumes of longer-dated government debt supply.

prices were soft after a 2 percent fall the previous day, with U.S. crude futures hitting an eight-month low as granted sanction waivers to top buyers of Iranian and as said it has so far been able to sell as much as it needs to.

U.S. Intermediate (WTI) crude futures traded 0.5 percent lower at $61.91 a barrel having hit a low of $61.31 on Tuesday, the weakest price since March 16.

In the currency market, the dollar dipped on the U.S. election results. Against the yen, it was 0.2 percent lower at 113.23, reversing earlier gains to one-month high of 113.82 yen.

The euro rose 0.3 percent to $1.1467 and the British pound gained 0.3 percent to $1.3140, hitting a three-week high.

Sterling extended gains made the previous day on hopes of a Brexit deal breakthrough after said "Thumbs Up" on his way out of a cabinet meeting.

That helped sterling recover losses following remarks from a of the Northern earlier that it looked like Britain would exit the EU without a deal.

(Reporting by in Tokyo; additional reporting by in Tokyo and Daniel Bases in New York; Editing by Sam Holmes)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, November 07 2018. 12:30 IST
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