Dollar slides and gold jumps three percent as markets price divided Washington
Treasury rally bets on a presidency too weak to spend or bomb freely, banks and clean energy surge while Tesla and SpaceX drop up to five percent
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Dollar falls while gold and US Treasury bonds rally as markets react to Democrats’ midterm election victory – business live
theguardian.com
The dollar fell while gold and US Treasury bonds rallied after Democrats took both the Senate and the House of Representatives in the midterm elections, opening a new era of divided government in Washington. European equities rose across the board, with banks and clean energy stocks leading the gains.
The bond rally is not enthusiasm for a Democratic program; in a divided Washington no program can pass. It is a price on paralysis: a Congress held by one party and a White House held by another cannot agree on new spending, new tariffs or new wars, and the assets that do well when governments do nothing rose accordingly. The previous Congress, Republican in both chambers, rarely reined in the president. The new one will struggle to pass anything at all.
The pan-European Stoxx 600 gained 0.6 percent, with bank stocks up 2.8 percent and clean energy names leading the risers: Vestas Wind Systems jumped about five percent, Ørsted surged 7.4 percent and Nordex leapt 6.5 percent. European defence stocks fell. The largest American technology names moved the other way — Amazon, Alphabet, Microsoft and Meta declined in European trading, and Tesla and SpaceX fell between 4.5 and five percent, according to Reuters — as investors weighed tougher regulation of the AI sector and higher taxes on cryptocurrencies. Fears over the debt taken on to fund the AI buildout had already produced selloffs in recent months.
Aidan Yao, senior investment strategist at Amundi, called the midterms 'more like a referendum on AI than a referendum on Trump': if the AI theme faces restrictions, US growth, inflation and monetary policy 'all become very, very uncertain'. Kathleen Brooks, research director at trading platform XTB, described the market impact as mild so far and said investors would now move from trading the uncertainty of the result to trading the reality of what it means for policy.
Gold, the asset people buy when they do not expect governments to fix anything, rose three percent to $4,046 an ounce.