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US stocks fall as Democrats lead US stocks fall as Democrats lead
(10 minutes later)
US shares dipped on Wednesday after the Democrats gained back the House of Representatives in mid-term elections.US shares dipped on Wednesday after the Democrats gained back the House of Representatives in mid-term elections.
The market is nervous about the impact Democrats, who have regained the House after 12 years, will have on business.The market is nervous about the impact Democrats, who have regained the House after 12 years, will have on business.
It remains to be seen who will win control of the Senate, further adding to investor uncertainty.It remains to be seen who will win control of the Senate, further adding to investor uncertainty.
The Dow Jones was trading 28 points, or 0.2%, lower at 12,128.20 in early trading, after falling as much as 0.5%. The S&P 500 and Nasdaq were down 0.2%.The Dow Jones was trading 28 points, or 0.2%, lower at 12,128.20 in early trading, after falling as much as 0.5%. The S&P 500 and Nasdaq were down 0.2%.
"This is almost the worst possible outcome for the markets," said Al Goldman, a strategist at AG Edwards."This is almost the worst possible outcome for the markets," said Al Goldman, a strategist at AG Edwards.
"Usually the market can deal with whatever outcome, except an uncertain one." "Usually the market can deal with whatever outcome, except an uncertain one." Business fears
Business fears
There are fears that Democrats may look to raise taxes and the minimum wage once they control the House of Representatives - and possibly the Senate.There are fears that Democrats may look to raise taxes and the minimum wage once they control the House of Representatives - and possibly the Senate.
Analysts said that the firms most likely to be affected by the Democrats' win were in the defence, pharmaceutical, oil and insurance industries.Analysts said that the firms most likely to be affected by the Democrats' win were in the defence, pharmaceutical, oil and insurance industries.
Alternative energy firms, however, may be among those to benefit.Alternative energy firms, however, may be among those to benefit.
Democrats may also be less favourable to small business, especially in relation to tax breaks.Democrats may also be less favourable to small business, especially in relation to tax breaks.
Global concernsGlobal concerns
There is also concern that the fading hopes for world trade talks may have been dealt a fatal blow by this election, with the Democrats unlikely to grant President Bush the authority to negotiate any further trade deals after the current provision runs out on 1 July 2007. There is also concern that hopes for world trade talks may have been dealt a fatal blow by this election, with the Democrats unlikely to grant President Bush the authority to negotiate any further trade deals after the current provision runs out on 1 July 2007.
Fears about jobs lost to exports from China played an important role in Democratic gains in the Midwest. Fears about jobs being exported to China played an important role in Democratic gains in the Midwest.
On the other hand, the bond markets may welcome the Democrats' stated commitment to tackle the long-term budget deficit, and the deadlock may actually make it harder to get through any major spending programmes or additional tax cuts. However, the bond markets may welcome the Democrats' stated commitment to tackle the long-term budget deficit.
The deadlock may actually make it harder to get through any major spending programmes or additional tax cuts, analysts say.
Tackling the twin budget and trade deficits is a big task that requires a bipartisan approach - something that both sides pledged to do after the election.Tackling the twin budget and trade deficits is a big task that requires a bipartisan approach - something that both sides pledged to do after the election.
The economy proved a potent issue at the election, with many voters fearing for the future despite the relatively strong economic performance of the Bush administration so far. The economy proved a potent issue at the election, with many voters fearing for the future, despite the relatively strong economic performance of the Bush administration so far.
Among the concerns was the fact that real wages did not seem to be rising for ordinary voters despite strong growth.Among the concerns was the fact that real wages did not seem to be rising for ordinary voters despite strong growth.
If the US economy continues to slow down, the economy will also be an issue in 2008.If the US economy continues to slow down, the economy will also be an issue in 2008.
General stock market fall Wider fall
Even though the stock market fell, the Dow index remained above the 12,000 mark, a level it topped in October as it climbed to a record.Even though the stock market fell, the Dow index remained above the 12,000 mark, a level it topped in October as it climbed to a record.
The decline in US stocks echoed a general trend of declining European share indexes.The decline in US stocks echoed a general trend of declining European share indexes.
In the UK, the FTSE 100 of leading shares lost 0.1% to 6,239 while Germany's Dax was 0.1% lower at 6,361.96. In the UK, the FTSE 100 of leading shares closed 0.1% to 6,239 while Germany's Dax was 0.1% lower at 6,361.96.