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Global stocks climb after US midterm vote but dollar takes hit

Reuters  |  NEW YORK 

By Hilary Russ

NEW YORK (Reuters) - World stock markets climbed on Wednesday after the U.S. midterm election divided control of Congress, but the vote's outcome, which cast doubt on further U.S. tax cuts, hit the dollar and sent Treasury yields lower.

While gridlock in could hamper Donald Trump's political and economic agenda, few expect a reversal of tax cuts and financial deregulation measures that have already been enacted.

That view helped all three Wall Street equity indices extend gains, and investors piled into growth sectors such as technology and [.N]

The Dow Jones Industrial Average <.DJI> rose 262.58 points, or 1.02 percent, to 25,897.59, the <.SPX> gained 33.77 points, or 1.23 percent, to 2,789.22 and the <.IXIC> added 124.50 points, or 1.69 percent, to 7,500.46.

The Democrats looked headed to gain more than 30 seats in the House of Representatives, well beyond the 23 they needed to claim their first majority in eight years. With Trump's holding on to its majority, the results from Tuesday's election were in line with expectations.

"The good in a way for markets is that there was an uncertainty that's now been removed. We know where we stand for the next two years, and investors will focus back on the fundamentals, which are (company) earnings growth and the economy," said Guy Miller, at

Still, a split could hamper Trump's push for a further round of tax cuts and deregulation, measures that have turbocharged the U.S. economy, stock markets and the dollar.

MSCI's gauge of stocks across the globe <.MIWD00000PUS> gained 1.02 percent, while the pan-European index <.STOXX> rose 1.06 percent.

Riskier European bonds such as those from were in demand, with yields falling 6-9 basis points.

The starts its two-day monetary policy meeting on Wednesday, where it is expected to keep interest rates unchanged. A rate hike in December is largely priced in.

"The policy path implied by this outcome shifts the narrative away from rising rates at least temporarily," Morgan Stanley's wrote in a client note.

That view pushed the dollar lower against a basket of currencies. The dollar index <.DXY> fell 0.42 percent, with the euro up 0.35 percent to $1.1466.

yields fell, with investors trying to figure out the impact of the election on government spending and borrowing in the coming year.

"Democrats winning the House is likely to mean slightly less fiscal stimulus going forward. The market may take that well because the Federal Reserve will have less work to do," said Richard Buxton, at Merian Global Investors.

Benchmark 10-year notes last rose 7/32 in price to yield 3.1875 percent, from 3.215 percent late on Tuesday.

Attention will focus on Trump's hard line on trade tariffs, which he can impose without Congressional approval. That keeps alive worries about a trade war between and the

Chinese shares closed 0.7 percent lower, while Hong Kong markets ended just above flat. <.HSI> [EMRG/FRX]

The dollar's weakness lifted other currencies. The Japanese yen strengthened 0.07 percent versus the greenback at 113.37 per dollar, while sterling was last at $1.3134, up 0.28 percent on the day.

reversed earlier declines after a report that and were discussing output cuts in 2019.

U.S. crude fell 1.32 percent to $61.39 per barrel and Brent was last at $71.47, down 0.92 percent on the day.

(Additional reporting by and in San Fransisco; Richard Leong in New York; Sujata Rao in London; Editing by Bernadette Baum)

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

First Published: Thu, November 08 2018. 00:59 IST