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(Reuters) – Democrats rode a wave of dissatisfaction with President Donald Trump to win control of the U.S. House of Representatives on Tuesday, giving them the opportunity to block Trump's agenda and open his administration to intense scrutiny.
In the midst of the White House, Trump and his fellow citizens expanded their majority in the US Senate following a divisive campaign marked by fierce clashes over race, immigration and other cultural issues.
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Latest U.S. stock market report
MARKET REACTION:
STOCKS – U.S. S & P 500 e-mini futures
BONDS – The 10-year U.S. Treasuries yield fell to a low session of 3.18 percent.
DOLLAR – The US dollar index <.dxy> was down 0.35 percent.
COMMENTARY:
RAJIV BISWAS, ASIA-PACIFIC CHIEF ECONOMIST, IHS MARKIT, SINGAPORE
"From the Asian perspective, the biggest issue of concern for Asian financial markets, how will the situation affect the U.S.-China trade war." Will it mean that the situation will be escalating further?
"When we look at the whole spectrum of political parties, both the Republican and the Democrat, both sides of the world have a view of the situation.
"I do not think the shift in the situation of the Democrats – if they do in fact take the House – would really change the thrust of the US Congress and the Trump administration to try to push ahead trade deal with China, which would reduce the bilateral trade deficit and provide greater reinsurance for the US
KOJI FUKAYA, PRESIDENT, FPG SECURITIES, TOKYO
"The key questions for the currency market today, will the Trump administration be able to keep pursuing policies to stimulate the U.S. economy, and will there be a shift towards China over trade?"
"The Trump administration's basic stance towards China is unlikely to change for now." But if they do decide to seek a trade compromised, then the loss of the House could have a impact on the Democrats known for their tough stance towards China . "
KYOYA OKAZAWA, HEAD OF INSTITUTIONAL CLIENTS APAC, BNP PARIBAS, HONG KONG
"The Japanese market is likely to have a negative impact on the market."
"Investors will gradually realize that Democrats are hard on China, so it will not matter to the market after the midterm elections."
"The result will not change the Trump administration's tough trade stance with China." A House controlled by Democrats may be pushing for a further escalation of U.S.-China trade tensions, and even Japan may be a target (for the auto industry).
DOUG BIBEN, FOUNDER AND PORTFOLIO MANAGER AT BCM, LOS ANGELES
"It was a good enough night for the president … there was not a 'Blue Wave.' I think it was a pretty good night for the markets and the U.S. economy. If we were to see fiscal stimulus, it would come in the form of infrastructure. That could be the big stimulus coming if you can put together a coalition. You can not spin a tax cut politically for the rich purpose infrastructure is about jobs. I think that is the likely scenario. Right now, the economy is doing much better than ever before. "
JUAN PEREZ, SENIOR CURRENCY TRADER, TEMPUS, INC, WASHINGTON
"Things fell as expected, so we have to see if the house will affect the trade." This is what we have seen in the past. by over 2.5 percent throughout October. "
ED AL-HUSSAINY, SENIOR RATES AND CURRENCY ANALYST, COLUMBIA THREADNEEDLE INVESTMENTS, MINNEAPOLIS
"Assets are reacting overnight to shifting probabilities around the consensus view that Democrats will take the House; the probability of a Republicans losing their Senate will still remain trivial."
"A break of 1.13 in euro / dollar and 3.25 in 10-year Treasury yields in the short term, a Republican loss in the House, line with consensus expectations, should nevertheless increase risk market volatility, be positive, and be positive for US rates. "
"Long dollar and short Treasury future positioning is relatively stretched going into tonight and could exaggerate these short cuts."
"We are confident that these events will be finalized and the 2019 legislative agenda will begin to take shape over the next several months."
NICK TWIDALE, ANALYST, RAKUTEN SECURITIES AUSTRALIA, SYDNEY
"There was some fear and risk of a sensationalist result.
"We'll see a couple of days of risk trading on the back of these results." Then we'll go back to closely analyzing the situation in the US-China There will be a lot of focus on the Trump-Xi meeting after The next time Trump speaks on trade he will be a lot of attention to what he says.
"Based on today's results, it will be difficult for the Trump administration to continue its agenda."
MICHAEL PURVES, HEAD OF EQUITY STRATEGY DERIVATIVES, WEEDEN & CO, NEW YORK
The The everyone everyone I I,,, ton ton ton ton ton ton ton ton ton ton ton ton ton ton ton ton ton ton ton ton ton ton ton ton ton ton ton ton ton is an uncertainty factor that is now out of the market. "
"Everything is playing out pretty normally."
"What's important for the market is that we're going to be more of a gamer, but it's going to be more of an offense, but the market would have expected it. "
"We have a bit of divided government but that's not necessarily market negative,"
"It's going to moderate the Trump agenda, but the big stuff on tax is done and on deregulation it's not clear that a Democratic House would change that too much."
JOHN VAIL, GLOBAL STRATEGIST CHIEF, NIKKO ASSET MANAGEMENT, NEW YORK
"The Democrats did a good job of selecting House candidates, many of whom are women with military backgrounds, to defeat GOP incumbents, so the House will be controlled by the Democrats, which will make trump's life miserable for the next two years, with many "Incriminations, however, will also be of great help to the attorney general."
"The GOP will increase its majority in the Senate, which will make confirmations of judges and administration will be easier." It will also make the conviction of Trump, if it is impeached by the House, less likely.
MASAAKI KANNO, CHIEF ECONOMIST, SONY FINANCIAL HOLDINGS, TOKYO
"One of the most important takeaways from the market participants" viewpoint is that one of the uncertainties disappears – that is political uncertainty in the US Of course, how the Trump administration will respond to the new political situation remains to be seen, but probably we should not expect too much change. "
"To the extent that political uncertainty disappears, the market is likely to be risky, which means that it will be less likely that it will be able to do so."
YOSHIMASA MARUYAMA, CHIEF ECONOMIST, SMBC NIKKO SECURITIES, TOKYO
"In the medium to long run, today's election outcome is not expected to have a big impact on the US financial markets." The Republicans under Trump have already got some policies rolling like tax cuts, and the midterm election outcome will at worst simply impede new policies from being enacted in the next two years. "
"Les markets could show a text book reaction to the vote, with equities coming under pressure and bonds benefiting in turn.But I expect the reaction to be limited to the Republicans losing control of the House does not spell a dramatic structural change. "
MATT SIMPSON, SENIOR ANALYST, FARADAY RESEARCH, SINGAPORE
"From the market perspective, it's not a huge surprise." The market will now focus on the G20 for any indications from Trump now that midterms are out of the way. "
JON HILL, US RATES STRATEGIST, BMO CAPITAL MARKETS, NEW YORK
"The return to political gridlock in Washington will likely serve to temper growth expectations, or at least moderate the prospect of additional stimulative fiscal policy. However, we do not anticipate this to deter the Fed from continuing to deliberate the monetary policy of the economy. This combination presents an additional impetus for the (Treasury yield) curve to move flatter from here. "
MOHANNAD AAMA, MANAGING DIRECTOR, BEAM CAPITAL MANAGEMENT LLC, NEW YORK
"If initial results hold then it will be a slight positive for the markets to the less preferred outcome for markets of a Democratic Congress did not materialize. worst case outcome then we may be looking at a slight albeit short lived rebound in the days ahead. "
"Now that the elections are behind us, earnings and the Fed will be back in focus." "All indications are that of those factors supporting multiple expanding for stocks."
RAY ATTRILL, HEAD OF FX STRATEGY, NATIONAL AUSTRALIA BANK, SYDNEY
"The markets have been geared to the Democrats, winning the house." We are seeing the dollar in the face of this issue.
It is also the risk of a government shutdown.
"Trump has gotten to the bottom of this table and it's going to be more expensive."
STEVE FRIEDMAN, SENIOR GLOBAL ECONOMIST, BNP PARIBAS ASSET MANAGEMENT, NEW YORK
"In terms of major economic implications, I think importantly, two things do not change." One is the 2016 tax law, with divided government, and second, trade policy. Because the president has significant authority over trade policy and can move forward without Congress on tariffs. "
"If the domestic agenda is blocked as a result of a dispute, it is more likely that it will be more effective. , I think Democrats are hard pressed to stand up too aggressively to the President on trade policy. "
"I see the scope for additional spending measures passed by Congress, which is why there is so much more to do with it. private sector in infrastructure spending, but I think that's one area where markets might be under-pricing the risk of stimulus. "
KEITH LERNER, CHIEF MARKET STRATEGIST, SUNTRUST ADVISORY SERVICES, ATLANTA
"Even though the Republicans look like they did a little bit better in the Senate, the broad strokes are fairly consistent with what the consensus is that we're seeing a mild positive reaction."
"The modest reaction suggests that you are going to be the market leader in the market." growth. "This is telling you that you are in a market that is more than likely to be more important than these results."
MARK GRANT, MANAGING DIRECTOR AND CHIEF GLOBAL STRATEGIST, B. RILEY FBR, INC, FT LAUDERDALE, FLORIDA
"The split Congress was the consensus of the Republicans losing the House and the Republicans keeping the Senate. Although some say is good for financial markets, I disagree. Kavanaugh and the impeachment of President Trump. You could also argue that the Democrats might call for a roll of tax cuts. If these things come into actual play, I think it would be a disaster for the equities markets. I am concerned that this could really play out. This could be a decisive negative for the equity markets. "
JUSTIN WARING, UBS GLOBAL WEALTH MANAGEMENT, NEW YORK, INVESTMENT STRATEGIST
"Given that the" base case "scenario is playing out-what does it look like? A perfect average middle-term election of the President's party an average of 31 or so House seats-markets are unlikely to react much ahead of this result .
"That being said, some parts of the U.S. equity market could begin to face the issue of Democratic House committees. For example, Representative Maxine Waters looks to the House Financial Services committee. She has long opposed deregulation efforts for financials. In our view, there is a very low chance of inflation under this Congress, but markets will begin to freight about 'what dreams may come' if Democrats win a follow-up victory in 2020. Even so, we continue to recommend an overweight to financials. Despite potential perceived headwinds from House committee hearings, there are more important factors at play, and political considerations are unlikely to override the fundamentals. "
(Americas Economics and Markets Desk, + 1-646-223-6300)
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