The future of Wall Street and Asian equities losing momentum as Democrats win the House

Wall Street Asian equity and equity futures lost momentum on Wednesday after Democrats gained control of the House of Representatives, strengthening the party's ability to block President Donald's political and economic agenda. Trump.

However, European equities are expected to rise as yield spreads anticipate gains of up to 0.5% in the UK FTSE, 0.8% in the French ACC and 0.7% in the German DAX.

The victory of the House of Democrats creates an obstacle for Republicans who want to easily pbad a law by both houses of Congress, darkening the prospects of some of Trump's key economic proposals.

According to major US broadcasters, Democrats would win at least 25 seats, out of the 23 they needed to get their first majority in the House in eight years, while Republicans still won a few seats in the Senate.

Related: Democrats take control of the House while Republicans sit in the Senate

Read more: Points to remember from the mid-term elections in the United States in 2018

Although both results were broadly in line with market expectations, which partly explains the fact that markets did not sell, the prospect of a political stalemate creates uncertainty for investors. The dollar has weakened compared to most of its major counterparts.

"In the short term, a Republican loss in the House should magnify risk market volatility, hurt positive sentiment, and be positive for US rates," said Ed Al-Hussainy, senior rate and currency badyst at Columbia. Threadneedle Investments, Minneapolis. United States.

"Long-term positions on the dollar and short-term Treasury positions are relatively tense tonight and may exaggerate short-term price movements," he added.

In addition, newly-empowered House Democrats will have the ability to investigate Trump's tax returns, potential trade conflicts and allegations of links to his 2016 campaign with Russia.

On the equity markets, US S & P 500 futures traded up last 0.1%, and the broadest MSCI, Asia-Pacific equities, was the largest contributor to equities. outside Japan, have progressed similarly, but far from the peaks achieved before.

The Nikkei of Japan ended down 0.3%, giving up the gains in the morning.

"It has clearly become difficult for Republicans to adopt additional tax cuts or changes in Dodd-Frank regulations (on financial institutions) for example," said Tomoaki Shishido, securities badyst at fixed income of Nomura Securities.

The Asian markets had been marked by volatile Asian markets and the dollar was swaying in response to the Republicans' fluctuating outlook for power.

If a divided Congress would split Trump's agenda, such as tax cuts or deregulation, some investors think the Democrats could agree to spend more.

"There are still areas of trade-offs in spending, so even with a split government, I expect more fiscal stimulus. There is also a possibility of compromise on infrastructure spending, "said Steve Friedman, senior economist at BNP Paribas Asset Management.

"If there is an additional fiscal stimulus, this suggests that fiscal policy is more of a drag on US growth and that it should, other things being equal, support the actions."

On the other hand, many investors are waiting for Trump to continue to take a tough stance on tariffs, which he can enforce without Congressional approval, and foreign policy.

This raises concerns about a trade war between China and the United States.

Trump's mbadive tax cut, which came into effect in December, and a congressional spending deal in February helped to revive the US economy, but also widened the deficit in the federal budget.

As a result, the Treasury's supply has increased, leading to higher US bond yields.

Election results drove down 10-year US Treasury yields by about 2.5 basis points to 3.189 percent from 3.261 percent, its highest level in seven years, a month ago.

But the debt market is also under pressure because of this week's record long-term public debt supply volumes.

In the currency market, the dollar has plummeted.

Against the yen, it was 0.3% lower at 113.13, reversing earlier gains to hit a one – month high of 113.82 yen.

The euro rose 0.15% to 1.1444 dollar and 0.1% pound to 1.3117 dollar, hitting its highest level in three weeks.

Sterling extended the gains made the day before hoping for an agreement with Brexit after Brexit secretary Dominic Raab declared "Thumbs Up" after his cabinet meeting.

This allowed the sterling to recover losses following the statement of a senior member of the Democratic Unionist Party of Northern Ireland, that it seemed that Britain would leave the EU. without an agreement.

Oil prices were weak after falling 2% the day before. US crude futures prices reached their lowest level in eight months as Washington issued sanctions exemptions to major Iranian oil buyers, and Iran said it had so far managed to sell as many oil he needed.

West Texas Intermediate (WTI) futures contracts fell 0.6% to $ 61.85 a barrel after hitting a low of $ 61.31 on Tuesday, the lowest price since March 16th.

Futures contracts on Brent International fell 0.25% to $ 71.95, after reaching a low of $ 71.18 on Tuesday, its lowest level since August 16th.