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| Dollar falls and shares surge as markets brace for gridlock after US elections - business live | Dollar falls and shares surge as markets brace for gridlock after US elections - business live |
| (35 minutes later) | |
| This chart shows how the US dollar is the clear loser in the financial markets today, dropping against all major rivals: | |
| USD weaker vs all of G10 this morning pic.twitter.com/nWveYax6EX | |
| The US dollar is extending its earlier losses, and now down 0.6% against other major currencies as a new 12-day low. | The US dollar is extending its earlier losses, and now down 0.6% against other major currencies as a new 12-day low. |
| Bloomberg says: | Bloomberg says: |
| With Democrats winning the House of Representatives majority and Republicans clinching control of the Senate, President Donald Trump’s party loses full control of Congress. | With Democrats winning the House of Representatives majority and Republicans clinching control of the Senate, President Donald Trump’s party loses full control of Congress. |
| The results dim chances for any major fiscal initiative from the administration that might have triggered yield gains and hence a stronger greenback. | The results dim chances for any major fiscal initiative from the administration that might have triggered yield gains and hence a stronger greenback. |
| Mining giants are driving the London stock market higher, with Rio Tinto and BHP Billiton both up almost 3%. | Mining giants are driving the London stock market higher, with Rio Tinto and BHP Billiton both up almost 3%. |
| They’re benefitting from the weaker dollar, explains Russ Mould, investment director at stockbrokers AJ Bell: | They’re benefitting from the weaker dollar, explains Russ Mould, investment director at stockbrokers AJ Bell: |
| “A decline in the dollar following the US midterm elections has given a welcome boost to the mining sector as it will be cheaper for many foreign companies to buy dollar-denominated commodities. | “A decline in the dollar following the US midterm elections has given a welcome boost to the mining sector as it will be cheaper for many foreign companies to buy dollar-denominated commodities. |
| There’s also some optimism that Donald Trump might show us the Art of the Deal, and reach a trade agreement with China soon. | There’s also some optimism that Donald Trump might show us the Art of the Deal, and reach a trade agreement with China soon. |
| Richard Carter, head of fixed interest research at wealth manager Quilter Cheviot, argues that the White House will want to boast about another win soon: | Richard Carter, head of fixed interest research at wealth manager Quilter Cheviot, argues that the White House will want to boast about another win soon: |
| Tariffs implemented in September are due to rise from 10% to 25% on the 1 January 2019, and the President has also raised the possibility of putting tariffs on the remaining $250bn of Chinese imports that he has so far left untouched. | Tariffs implemented in September are due to rise from 10% to 25% on the 1 January 2019, and the President has also raised the possibility of putting tariffs on the remaining $250bn of Chinese imports that he has so far left untouched. |
| It may be that Trump adopts a softer stance in an attempt to get a deal on trade, thus allowing him to proclaim that he has ‘solved’ the China trade issue ahead of his 2020 re-election campaign. | It may be that Trump adopts a softer stance in an attempt to get a deal on trade, thus allowing him to proclaim that he has ‘solved’ the China trade issue ahead of his 2020 re-election campaign. |
| You can keep track of all the midterm election results here: | You can keep track of all the midterm election results here: |
| Here are five lessons for investors from the midterm elections, from Neil Wilson of Markets.com: | Here are five lessons for investors from the midterm elections, from Neil Wilson of Markets.com: |
| Gridlock tends to be good for the stock market, but in this case, it may not be as positive. To a degree the recent selloff in the stock market could be viewed as nervousness ahead of the mid-terms. Of course, the broader macro-economic outlook and US growth story is more important, but we must remember that the US boom is largely a function of Trumponomics – anything that curtails this will be at least mildly risk-off. | Gridlock tends to be good for the stock market, but in this case, it may not be as positive. To a degree the recent selloff in the stock market could be viewed as nervousness ahead of the mid-terms. Of course, the broader macro-economic outlook and US growth story is more important, but we must remember that the US boom is largely a function of Trumponomics – anything that curtails this will be at least mildly risk-off. |
| A split Congress will, in all likelihood, not stop Trump from doubling down on tariffs with China. This could result in us getting all the anti-growth measures of Trump without more of the pro-growth reforms. | A split Congress will, in all likelihood, not stop Trump from doubling down on tariffs with China. This could result in us getting all the anti-growth measures of Trump without more of the pro-growth reforms. |
| Market impact may be relatively muted, although with a slight risk-off tone initially due to uncertainty about what it will mean vis-à-vis economic policy, tax cuts and deregulation. A lot would depend on how the Trade War progresses and how tax cuts 2.0 do in the face of a split Congress and use of executive orders. | Market impact may be relatively muted, although with a slight risk-off tone initially due to uncertainty about what it will mean vis-à-vis economic policy, tax cuts and deregulation. A lot would depend on how the Trade War progresses and how tax cuts 2.0 do in the face of a split Congress and use of executive orders. |
| Likely bearish for the US dollar and so far seen some slight hints that this is playing out but for now the market reaction is not terrifically strong. | Likely bearish for the US dollar and so far seen some slight hints that this is playing out but for now the market reaction is not terrifically strong. |
| It’s going to be harder for Trump to pass more tax cuts, and it may be that reform of Dodd-Frank will die. Pharma stocks may well do well as a divided house probably makes reform of drug pricing off the agenda. | It’s going to be harder for Trump to pass more tax cuts, and it may be that reform of Dodd-Frank will die. Pharma stocks may well do well as a divided house probably makes reform of drug pricing off the agenda. |
| Aaron Anderson, senior vice-president for research at wealth manager Fisher Investments, argues that the prospect of political gridlock is actually good for shares. | Aaron Anderson, senior vice-president for research at wealth manager Fisher Investments, argues that the prospect of political gridlock is actually good for shares. |
| Legislation was hardly flying through Congress before midterms. Now with Democrats controlling the House of Representatives, the GOP increasing its majority in the Senate and President Trump in the White House, it will be nearly impossible to pass anything remotely controversial. | Legislation was hardly flying through Congress before midterms. Now with Democrats controlling the House of Representatives, the GOP increasing its majority in the Senate and President Trump in the White House, it will be nearly impossible to pass anything remotely controversial. |
| That will drive many people crazy, but markets love it. We should now have a long stretch where political risks go way down, which should be good for stocks.” | That will drive many people crazy, but markets love it. We should now have a long stretch where political risks go way down, which should be good for stocks.” |
| Shares are roaring ahead in early trading in Europe, as investors react to the midterm election results. | Shares are roaring ahead in early trading in Europe, as investors react to the midterm election results. |
| In London the FTSE 100 has gained 80 points, or over 1%, to 7,119. | In London the FTSE 100 has gained 80 points, or over 1%, to 7,119. |
| The French CAC and German DAX are both also up around 1%. | The French CAC and German DAX are both also up around 1%. |
| Some traders are concluding that gridlock on Capitol Hill could actually be good for America, if it stops Donald Trump driving up the US deficit. | Some traders are concluding that gridlock on Capitol Hill could actually be good for America, if it stops Donald Trump driving up the US deficit. |
| Simon French, chief economist at stockbrokers Panmure Gordon, argues that the midterm result is “as good as you could hope”. | Simon French, chief economist at stockbrokers Panmure Gordon, argues that the midterm result is “as good as you could hope”. |
| Having the president’s wings clipped by losing control of the House is helpful for avoiding the most obvious “end of cycle policy mistakes” - which in our view is pumping more deficit spending and protectionism into the economy, forcing the Fed to tighten at a faster rate. | Having the president’s wings clipped by losing control of the House is helpful for avoiding the most obvious “end of cycle policy mistakes” - which in our view is pumping more deficit spending and protectionism into the economy, forcing the Fed to tighten at a faster rate. |
| With the US dollar weakening fast, the pound has gained half a cent to $1.314 - a three week high. | With the US dollar weakening fast, the pound has gained half a cent to $1.314 - a three week high. |
| The euro has been lifted to a two-week high, at $1.147. | The euro has been lifted to a two-week high, at $1.147. |
| Bart Hordijk, market analyst at Monex Europe, says the prospect of Trump and Congress acting like “bickering inmates” for the next two years is hurting the US dollar. | Bart Hordijk, market analyst at Monex Europe, says the prospect of Trump and Congress acting like “bickering inmates” for the next two years is hurting the US dollar. |
| “Nevertheless, domestic political unrest may throw a spanner in the works for the dollar, as Trump’s relations with the Democrats will be essential in the coming months to determine the course of politics. | “Nevertheless, domestic political unrest may throw a spanner in the works for the dollar, as Trump’s relations with the Democrats will be essential in the coming months to determine the course of politics. |
| Potentially Trump, who was once a member of the Democratic Party, may manage to come together with the Democrats and agree on broad tax cuts for the middle class. This could be a boost for the economy and the dollar, assuming markets don’t start to fret about the increasing government deficit. Chances are higher that the Democrats will seize the opportunity to use their new control of certain commissions in the House to step up the investigations in Trump’s tax dealings, relations with Russia and claims of hush money payments. | Potentially Trump, who was once a member of the Democratic Party, may manage to come together with the Democrats and agree on broad tax cuts for the middle class. This could be a boost for the economy and the dollar, assuming markets don’t start to fret about the increasing government deficit. Chances are higher that the Democrats will seize the opportunity to use their new control of certain commissions in the House to step up the investigations in Trump’s tax dealings, relations with Russia and claims of hush money payments. |
| The menacing club of government shutdowns will be the Democrats’ to yield every time Trump goes too far out of line to their taste in the coming months. The dollar may, in the end, get the biggest whack from this.” | The menacing club of government shutdowns will be the Democrats’ to yield every time Trump goes too far out of line to their taste in the coming months. The dollar may, in the end, get the biggest whack from this.” |
| Good morning, and welcome to our rolling coverage of the global economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the global economy, the financial markets, the eurozone and business. |
| The US dollar is in retreat this morning after the Democrats won control of America’s House of Representatives in a gripping night of election drama. | The US dollar is in retreat this morning after the Democrats won control of America’s House of Representatives in a gripping night of election drama. |
| The midterm elections saw a Blue Wave sweep through Congress’s lower chamber, giving the Democratic party fresh power to control president Trump. Checks and balances are back -- although the Republicans did put up a better show in the Senate races, increasing their majority. | The midterm elections saw a Blue Wave sweep through Congress’s lower chamber, giving the Democratic party fresh power to control president Trump. Checks and balances are back -- although the Republicans did put up a better show in the Senate races, increasing their majority. |
| My colleague David Smith reports from Washington: | My colleague David Smith reports from Washington: |
| “We rebuked Trump and Trumpism at a critical moment,” Ilya Sheyman, executive director of the grassroots organisation MoveOn wrote in a celebratory email. | “We rebuked Trump and Trumpism at a critical moment,” Ilya Sheyman, executive director of the grassroots organisation MoveOn wrote in a celebratory email. |
| Many Democrats will be tempted to see the glass as half empty, engaging in self-flagellation over narrow defeats for some of its rising stars and a worse-than-expected loss of ground in the Senate. But the truth is that in the face of gerrymandering, voter suppression and an economy that continues to stay in the strong shape that Barack Obama bequeathed, the party reclaimed the House majority for the first time in eight years. That is no small achievement. | Many Democrats will be tempted to see the glass as half empty, engaging in self-flagellation over narrow defeats for some of its rising stars and a worse-than-expected loss of ground in the Senate. But the truth is that in the face of gerrymandering, voter suppression and an economy that continues to stay in the strong shape that Barack Obama bequeathed, the party reclaimed the House majority for the first time in eight years. That is no small achievement. |
| Opinion polls had predicted that the Democrats would have a good night, so these results shouldn’t shake the financial markets. | Opinion polls had predicted that the Democrats would have a good night, so these results shouldn’t shake the financial markets. |
| But the US dollar is already coming under pressure, dropping by 0.4% against a basket of other major currencies to a two-week low this morning. | But the US dollar is already coming under pressure, dropping by 0.4% against a basket of other major currencies to a two-week low this morning. |
| Investors are calculating that there will now be gridlock on Capitol Hill; the House will be free to oppose Trump policies which Democrats don’t agree with. | Investors are calculating that there will now be gridlock on Capitol Hill; the House will be free to oppose Trump policies which Democrats don’t agree with. |
| This could prevent the White House forcing tax cuts and new spending on infrastructure such as transport and water systems. | This could prevent the White House forcing tax cuts and new spending on infrastructure such as transport and water systems. |
| So if Trump can’t give the US economy another jolt of fiscal stimulus, the economy may slow...meaning US interest rates might not rise as fast as feared. | So if Trump can’t give the US economy another jolt of fiscal stimulus, the economy may slow...meaning US interest rates might not rise as fast as feared. |
| James Knightley, economist at ING, says president Trump will be feeling blue this morning: | James Knightley, economist at ING, says president Trump will be feeling blue this morning: |
| While not a great outcome for President Trump, it could have been worse. He clearly had plans to press on with infrastructure spending and further tax reform in the second half of his presidential term and while the policies are not dead, they are likely going to be curtailed or heavily revised by a Democrat-controlled House. Bi-partisanship will be required for progress to be made and for President Trump to generate a strong platform to defend his Presidency in 2020. | While not a great outcome for President Trump, it could have been worse. He clearly had plans to press on with infrastructure spending and further tax reform in the second half of his presidential term and while the policies are not dead, they are likely going to be curtailed or heavily revised by a Democrat-controlled House. Bi-partisanship will be required for progress to be made and for President Trump to generate a strong platform to defend his Presidency in 2020. |
| However, the US economy will face an increasing number of challenges over the next couple of years as support fades from the fiscal stimulus and weaker global growth (contributed to by President Trump’s trade protectionism), a stronger dollar and higher interest rates provide increasing headwinds. A weaker economy and potentially falling asset prices and household wealth would compound the problems for President Trump. | However, the US economy will face an increasing number of challenges over the next couple of years as support fades from the fiscal stimulus and weaker global growth (contributed to by President Trump’s trade protectionism), a stronger dollar and higher interest rates provide increasing headwinds. A weaker economy and potentially falling asset prices and household wealth would compound the problems for President Trump. |
| We’ll be mopping up financial reaction through the day. Our main US election liveblog is here, tracking all the latest results: | We’ll be mopping up financial reaction through the day. Our main US election liveblog is here, tracking all the latest results: |
| The agenda | The agenda |
| 8.30am GMT: Halifax survey of UK house prices | 8.30am GMT: Halifax survey of UK house prices |
| 3.30pm GMT: US weekly oil inventory figures | 3.30pm GMT: US weekly oil inventory figures |