Goldilocks or gridlock?
SPY•Investors wagered that Democratic gains in the US midterm elections could create Washington gridlock and support markets, while hopes rose for a possible end to the Iran war. Brent crude fell below $100 a barrel, Treasury yields reached a two-month low and the dollar weakened against most major currencies.
1. Markets weigh election fallout
Investors wagered that gridlock in Washington after Democrats’ sweep in the US midterm elections could be good for markets, as hopes rose for a possible end to the eight-month-long war in the Middle East. Brent crude futures fell to a two-month low below $100 per barrel, as the weakened president faced a choice between a negotiated exit and escalation. President Donald Trump said the Iran war had been worth it, despite acknowledging its role in Republicans’ election losses.
2. Oil, rates and stocks
The US-Israeli war with Iran, which started at the end of February, has shaken global energy markets, driven up prices and upended the rates outlook. The drop in oil prices helped ease pressure on some Asian stock markets, while South Korea’s KOSPI fell 4.8% and Taiwan stocks slid 2.6% as investors fretted over data-center spending. Treasury yields fell to a two-month low, the dollar struggled against most major currencies, and sterling held near a seven-week high ahead of a Bank of England policy decision. The central bank was widely expected to raise rates for the first time in three years.
