The Democratic Party swept both the Senate and the House of Representatives in the U.S. midterms, and the impact quickly spread to global financial markets. As traders assessed the implications of the election results for U.S. President Donald Trump's policy agenda, global stock markets and U.S. Treasury prices rose on Wednesday, while the dollar weakened. Markets are concerned that stricter regulatory scrutiny could hinder the rapid growth of the artificial intelligence industry.

S&P 500 index futures reversed their morning decline, rising by 0.7%. Nasdaq 100 index futures also saw significant volatility, as investors strive to assess the potential impact of the election results on the investment boom in artificial intelligence ( AI ). After Democrats won the Texas Senate and governor elections, Tesla and SpaceX stock prices fell in pre-market trading.

Asian AI related stocks initially led the decline in the stock market, however, as the results of most mid-term elections were gradually announced during the early trading hours in Europe, global stock markets began to turn upward. The MSCI global stock index rose by 0.13%, which some investors saw as a way to hedge against AI related risks. The European Stoxx 600 index, which serves this purpose, also rose by 0.5%.

The Democratic Party achieves a double victory

The Democratic Party achieved victories in several traditionally Republican strongholds in the United States, flipping at least seven Senate seats and making breakthroughs in some House of Representatives districts where Republicans were expected to win comfortably in 2024. This outcome means that compared to the situation before Trump's second term, when the Republican Party controlled Congress and the president's power was relatively limited, Trump will face significantly greater resistance in pushing his policy agenda in the future.

Trump stated that if the Democrats are willing to cooperate with him, he is also open to working with the Senate and House controlled by the opposition party.

The extent of the Democratic Party's victory this time is evident from their breakthrough in areas that have long been considered safe seats for the Republican Party. This change in the political landscape may catch some investors off guard.

Federated Hermes, the Chief Investment Officer of the Global Liquidity Market, stated: "The Democrats achieved a double victory in the U.S. midterms that was almost unforeseen at the beginning of the year. This 'blue wave' means that the U.S. federal government is almost certainly going to be divided on most issues."

She added, "This situation usually hinders the passage of new laws, yet the broader financial markets have always tended to welcome such an environment, as it reduces policy uncertainties."

Initially, investors believed that a decisive victory for the Democratic Party in the elections could have a negative impact on the stock market, as the new Congress might strengthen regulatory scrutiny, especially targeting high-growth tech companies. However, as the yield on U.S. Treasury bonds declined and market confidence in the robust fundamentals of the U.S. economy grew, the stock market subsequently found support.

Lombard Odier of the investment management company stated: "The political deadlock should reduce the likelihood of the United States implementing another large-scale fiscal expansion, and the subsequent decline in Treasury yields may ultimately provide some support for the stock market." He added, "There has been no sudden change in the fundamental environment; U.S. economic growth remains robust."

Midterm elections may affect AI

On the European Tradegate trading platform, the stock prices of Tesla, owned by Elon Musk, and SpaceX fell by about 4.5% to 5%. Musk plans to merge these two companies. In contrast, the decline in other large tech stocks was only around 0.3% to 0.9%.

XTB Research Director Kathleen Brooks stated: "Overall, so far, the impact of these election results on the market has been relatively mild. Investors will gradually stop trading based on the uncertainty of the election results and begin to assess what these results mean for actual policies."

She added, "The election results on Wednesday are bad news for Tesla and SpaceX, but as semiconductor companies that are a core pillar of the AI investment boom, they may gradually overcome market concerns regarding AI regulation and continue to rise after the impressive gains in that sector on Tuesday."

In recent years, the wave of artificial intelligence has been a significant force driving up global financial markets. Tech giants have invested huge amounts of money in building data centers and expanding computing power, which has spurred the development of related industrial chains. This has also made investors particularly sensitive to any factors that could hinder the rapid expansion of AI.

The results of this election may also have a wide-ranging impact on the financial prospects of the United States, as well as on various industries such as defense, healthcare, and banking. The Russell 2000 index futures, which are more sensitive to the domestic economy of the U.S., have recently risen by 0.7%, after previously falling by 1%.

Bonds are becoming the clear winners.

U.S. Treasury bond prices rose. The yield on 10-year U.S. Treasury bonds fell by 5 basis points to 4.91%. Overnight, the yield once dropped by 6 basis points to a low of 4.89%, further putting pressure on the dollar.

Prashant Newnaha, a senior interest rate strategist at Dao Ming Securities based in Singapore, stated: "Bonds are becoming the clear winners in the market. Investors are beginning to re-evaluate their AI trades, while also considering that the possibility of further tax cuts being postponed and government spending slowing down is increasing."

At the same time, if changes in the balance of power in Congress limit the Trump administration's ability to further reduce taxes and increase government spending, U.S. Treasury bonds could benefit, as this would alleviate market concerns about the federal government's borrowing needs. Currently, the scale of U.S. debt has reached approximately $40 trillion, and the fiscal outlook has been a source of concern for bond investors.

David Chao, a global market strategist at Invesco Asset Management, pointed out: "With Democrats controlling Congress, it will be more difficult for the White House administration to pass major partisan legislation." He said, "A reduction in fiscal stimulus could alleviate the upward pressure on U.S. economic growth, inflation, and Treasury yields."

The US dollar continues to fall.

Among the major currencies, the US dollar recorded its largest decline in two months, weakening against all major currencies. The New Zealand dollar saw the biggest increase against the US dollar, rising by 0.8%. Both the euro and the Swiss franc rose by 0.6% against the US dollar.

David Forrester, a senior strategist at Credit Agricole Corporate and Investment Banking in Singapore, stated: "The Achilles' heel of the dollar is beginning to emerge." He pointed out that the trend of the dollar is closely related to the AI investment boom. "If the Democratic Party's 'blue wave' hinders data center construction and weakens the AI investment boom, it will put pressure on the dollar."

Bloomberg macro strategist Conor Cooper stated: "There are several reasons that suggest the dollar may continue to be weak. First, the correlation between the dollar and AI trades is a negative factor, as the market believes that the power dynamics of the new Congress could pose risks to the AI industry. Second, it will be more difficult for the Republicans to pass fiscal stimulus measures in the future to support the U.S. economy, which could have provided support for the dollar."

Cryptocurrencies face a new reality of regulation

Bitcoin initially fell by 2.8% as investors feared that full control of Congress by the Democrats could hinder legislative progress in support of the cryptocurrency industry and increase regulatory scrutiny of digital asset companies. However, Bitcoin later recovered all of its losses.

The Chief Investment Officer of Singapore’s Vantage Point Asset Management, Nick Ferres, stated: “Although the market generally expected the Democrats to sweep the congress, the actual margin of victory may be equally important.” He added, “The main risk lies in the possibility that AI and the cryptocurrency sector may face stricter regulation.”

For those bullish on cryptocurrencies, the return of Democrat Sherrod Brown (Sherrod Brown) to the Senate is a major setback in these elections. Brown won the special federal Senate election held in Ohio on Tuesday, just two years after he lost his Senate seat. Brown has previously criticized the political influence of the cryptocurrency industry in Washington. Despite the fact that the Super Political Action Committee (Fairshake) backed by companies such as (Coinbase) and (Ripple) invested 30 million dollars in an attempt to prevent his election, Brown still managed to win in the end.

Gold surges strongly by over $110

In the crude oil market, oil prices were volatile on Wednesday. In the previous trading day, oil prices had reached a four-week low. On one hand, investors are assessing the prospects of negotiations to end the wars in Ukraine and Iran, while on the other hand, they are concerned that recent attacks in both conflicts may further disrupt energy supplies.

Spot gold rose by 3% to $4,046.91, hitting a high of $4,049 during the session, with an intraday increase of over $110. Hamad Hussain, a senior climate and commodities economist at Citi Macro, stated: "The Democratic Party's overwhelming victory in the U.S. midterms seems to have driven up gold prices, as investors' concerns about the U.S. fiscal outlook have further intensified."

Hussain pointed out: 'Investors' concerns about fiscal risks are also supporting the prices of other precious metals.'

Trump: Democrats will submit crazy bills, and I will veto them.

It is reported that U.S. President Donald Trump has begun to warn the Democratic Party by using a bright red hat with just one word on it: "Veto" ( VETO ). As the Democratic Party seeks to regain control of Congress, Trump signals his intention to use one of the most powerful powers of the presidency: to veto legislative proposals he opposes.

In an interview with Fox News, Trump said, "They will submit some utterly absurd proposals, and I will veto them."

He expects that repeated use of the veto power may ultimately force Democrats to return to the negotiating table. However, Trump indicates that contact between the two sides may have already begun.

He revealed that since the election ended, several Democrats have taken the initiative to contact him.

The U.S. Treasury Department will release a quarterly refinancing announcement at 21:30.

The key points of the U.S. Treasury Department's quarterly refinancing announcement this time lie in the issuance scale of medium- and long-term government bonds and future guidance. The market generally expects that the auction scale of coupon bonds will remain unchanged in the short term, but investors are concerned to see whether the Treasury Department will signal a reduction in the issuance of 20-year and 30-year government bonds in 2027.

A reduction in the supply of long-term bonds could help alleviate the upward pressure on long-term yields; however, continued reliance on short-term debt financing may push up short-term yields and increase volatility in the maturity structure of U.S. Treasuries. The relevant impacts also depend on fiscal financing needs and investors' capacity to absorb such changes.

With Democratic Party victory expected, bets on clean energy stocks rebounded, and options trading volume surged.

As the prediction market bets that the Democratic Party will achieve a significant victory in the U.S. midterms on Tuesday, traders are directing funds towards a group of stocks that are generally classified by investors as beneficiaries of a left-leaning governance environment, including those in the clean energy sector.

According to the data from Cboe LiveVol, the option trading volume of Invesco Solar ETF ( TAN ) soared to 40 times the usual level on Tuesday.

In the past month, the fund typically traded less than 500 options contracts per day. However, as of midday on Tuesday, the trading volume had exceeded 20,000 contracts, with 99% of those being call options.

Focus on Individual Stocks

The Democratic Party achieved a great victory in the midterms, causing the stock price of Trump's media and technology group to fall by 11%. Trump holds 41% of the shares in the company, which operates the social platform Truth Social. With the Democrats in control of Congress, they will be able to exert checks and balances on the president's policies.

Tesla, under Elon Musk, and SpaceX saw their stock prices fall by nearly 6% and over 9% respectively. This decline occurred after the Democratic Party won control of both the Senate and the House of Representatives. Many newly elected members hold a critical attitude towards the large-scale construction of data centers driven by artificial intelligence. SpaceX operates AI supercomputing infrastructure in the central and southern regions, while Tesla has established related facilities in Texas.

A number of new cloud service providers are seeing declining stock prices: CoreWeave has fallen by 7%, IREN has tumbled by 6%, and Nebius has dropped by about 5%. The Democratic Party won in Texas, and referendums in several other states across the U.S. have rejected data center projects, which is expected to pose operational obstacles for companies in the data center industry, according to Cailian News.

Novo Nordisk's share price rose by over 6%. The global healthcare company reported earnings of 5.79 Danish kroner (approximately 0.63 US dollars) per share, which is higher than Wall Street's forecast of 5.10 Danish kroner (about 0.55 US dollars). The company raised its performance guidance for the fiscal year 2026, showing optimism about the sales prospects of GLP class drugs. Economic Reference Network.

Civis Health's stock price fell by more than 2%. The company announced that it will split into two independent entities in the first half of 2028. This split is equivalent to reversing the $78 billion acquisition of Aetna Insurance back then, as the retail pharmacy business will be divested.

McDonald's releases financial report, stock price rises 2%. Adjusted earnings per share are $3.57, higher than the consensus forecast of $3.38 by Reuters analysts; however, revenue of $7.16 billion fell short of the market expectation of $7.29 billion.

The stock price of MultiNationals rose by 18%. In the third quarter, revenue reached $309 million, exceeding Refinitiv's market forecast of $303 million; the quarterly monthly active users were 153 million, surpassing the forecast of 149 million; the adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin was also better than expected.

Employee benefits consulting firm Alight's stock price surges by 22%, and the company raises its full-year 2026 performance forecast. The expected annual revenue range is $2.115-2.125 billion, which is higher than FactSet's consensus forecast of $2.09 billion; after adjustment, EBITDA's forecast is $410-420 million, also exceeding market expectations of $404.4 million.

Avis Rent Cars' stock price fell by about 2%, and its third-quarter performance was mixed. Avis reported earnings of $5.15 per share, a significant decline from $10.11 in the same period last year; revenue was $3.44 billion, slightly higher than FactSet's forecast of $3.42 billion.

Supermicro Semiconductor's stock price remained relatively stable. The company's earnings per share after adjustment for the third quarter were $2.09, higher than Reuters' forecast of $1.95; the revenue guidance for this quarter also exceeded market expectations.

The stock price of Toast, a catering management software company, fell by 5%, despite its third-quarter financial report data exceeding the expectations of FactSet. Toast also announced that Chief Financial Officer Elena Gomez will leave her position at the end of 2026, to be succeeded by Senior Vice President of Finance Michael Sennor.

Wireless network service provider SWKS saw its stock price plummet by about 11%, with new fiscal quarter performance guidance falling short of market expectations. SiGon expects adjusted earnings per share of approximately $1.25 for the first fiscal quarter of this year, with revenue ranging between $1.8 billion and $1.9 billion; Refinitiv's consensus forecast is $1.50 per share and revenue of $1.99 billion. The company completed its merger with Qorvo (Covor) at the beginning of October, and this quarter is the first full financial reporting quarter since the merger.

The stock price of the ultra-microcomputer company rose by 2%, with both earnings per share and revenue exceeding Wall Street's expectations. The company expects net sales for the fiscal year 2027 to be between $72 billion and $82 billion, which is higher than Refinitiv's market forecast of $69.17 billion.

Cloud network equipment company Anruike's stock price rose by 4%, with the latest quarterly performance guidance exceeding expectations. Arista expects earnings per share of $1.26-1.30 and revenue of $3.9-4 billion for the fourth quarter; Reuters analysts expect $1.15 per share and revenue of $3.6 billion.

Financial technology company Block rose by 9%. Block exceeded expectations in both revenue and profitability for the third quarter, and also raised its full-year performance forecast up to December; the adjusted earnings per share are $1.13, higher than Refinitiv's forecast of $1.03; revenue was $6.72 billion, exceeding the expected $6.59 billion.

Customer service ticketing software company Freshworks saw its stock price fall by about 10%, despite the third-quarter financial report and annual guidance both exceeding expectations. After the latest quarter's adjustment, earnings per share were $0.22, with revenue at $245.4 million; analysts for FactSet expect earnings per share to be $0.18, with revenue at $245.1 million. The stock has performed strongly previously, with a cumulative increase of over 20% in the past three months.

After the Democratic Party took control of both houses of Congress, the renewable energy sector saw a general increase in prices. RUN, NXT, and PLUG all rose by about 6%; CSIQ rose by 7%; FSLR had a gain of nearly 8%.

Software company DocuSign experiences a 37% plunge in its stock price. The company has issued a warning that due to multiple factors including disputes over the T-Mobile agreement, the completion of the US cellular user integration project, and T-Mobile's reduction in discretionary expenses, revenue for the fiscal year 2027 could see a maximum decline of 18%.

Cloud monitoring service provider Datadog's stock price has fallen by 17%. The company's revenue and profits in the third quarter exceeded expectations, but the revenue forecast provided was weaker. Datadog expects revenue for the fourth quarter to be $1.19-1.20 billion, while the market consensus is $1.20 billion. The stock has already risen by 62% so far this year.

Kraft Heinz stock price rises by 3%. Kraft Heinz announced the sale of its North American coffee business to One Rock Capital Partnership Company. The company also disclosed its third-quarter financial results: adjusted earnings per share of $0.53, and revenue of $6.12 billion, both exceeding Reuters analysts' expectations ($0.42 per share and $6.09 billion in revenue).

Responsible Editor: Guo Mingyu