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The Election Showed a Divided Country. Investors Can Live With That. The Election Showed a Divided Country. Investors Can Live With That.
(about 5 hours later)
HONG KONG — Investors on Wednesday appeared to take the prospect of a divided government in Washington in stride, as Asian markets fell modestly, European markets opened higher and Wall Street looked set for a mildly positive opening. Investors on Wednesday appeared to take the prospect of a divided government in Washington in stride, as Asian markets closed mixed, European markets gained ground and Wall Street looked set for a positive opening.
Markets in Tokyo, Hong Kong and Shanghai fell slightly as the Democratic Party won a majority in the United States House of Representatives. The election results were largely as expected, and trading during the Asia day was tame. Markets in Tokyo and Shanghai fell slightly the day after the Democratic Party won a majority in the United States House of Representatives. In Europe, the major stock markets were trading about 1 percent higher.
In Europe, the major stock markets opened about 1 percent higher. The election results were largely as expected, and trading was tame.
The biggest fall in Asia was in China, where slowing economic growth and the trade war with the United States have been the main market drivers in recent months. Stocks there were down about 0.6% late on Wednesday. Other Asian markets were down less than half a percentage point. The potential for political gridlock, as President Trump faces a House controlled by Democrats, has already been priced in, said Geoffrey Yu, head of the United Kingdom investment office at UBS Wealth management.
Futures that track stocks in the United States signaled a small bump could be in the works on Wednesday morning. Futures that track the S&P 500-stock index were up 0.1 percent. “The pundits and the pollsters called it right,” Mr. Yu said. The appetite for stocks, reflected in the rising indexes, he added, “suggests the Republicans performed slightly better than expected.”
Investors see a Democratic-controlled House as an obstacle to President Trump and his efforts to slash regulations related to the finance industry and the environment, though it is unlikely to have a major effect on the United States economy. The Senate remained in Republican control, gaining seats in rural areas that favored Mr. Trump and where he campaigned in the last weeks. In Asia, markets slumped the most in China, where slowing economic growth and the trade war with the United States have been the main market drivers in recent months. Stocks there closed 0.7 percent lower on Wednesday. The Nikkei in Japan closed down less than half a percentage point, while the Hang Seng in Hong Kong ended the session slightly higher.
“Their implications are likely to be confined to shaping the regulatory and fiscal environment for specific sectors, notably financials and industrials,” said UBS, the investment bank, in a note on Tuesday. Futures that track stocks in the United States signaled a small bump could be in the works on Wednesday morning. Futures that track the S&P 500 were up 0.6 percent.
The impact on President Trump’s trade war with China is less certain. The loss of the House to the Democratic Party represents a blow to President Trump and his Republican Party, and signals dissatisfaction with his leadership. At the same time, Mr. Trump has wide latitude to act by himself on trade without input from Congress, and some Democratic lawmakers are sympathetic to his attitude toward Beijing. Investors see a Democratic-controlled House as an obstacle to Mr. Trump and his efforts to cut regulations affecting the finance industry and the environment, though it is unlikely to have a major effect on the United States economy. The Senate remains in Republican control, where the party gained seats in rural areas where Mr. Trump has strong support and where he campaigned in the last few weeks.
“Their implications are likely to be confined to shaping the regulatory and fiscal environment for specific sectors, notably financials and industrials,” UBS said in a note on Tuesday.
And it could lift the markets. Torsten Slok, Deutsche Bank’s chief international economist, noted that “a split Congress has historically been bullish for equities, and we expect to see the same pattern again.”
The impact on Mr. Trump’s trade war with China is less certain. The loss of the House to the Democratic Party represents a blow to the Republican Party and to Mr. Trump, and it signals dissatisfaction with his leadership. At the same time, Mr. Trump has wide latitude to act by himself on trade without input from Congress, and some Democratic lawmakers are sympathetic to his attitude toward Beijing.
Investors will be looking toward the next Group of 20 summit meeting, at the end of November, with that in mind, said Mr. Yu of UBS. “People are going to be less negative, relatively optimistic,” as they head toward that, he said.