The aftermath of the U.S. midterm elections has led to stark divergences in Asian stock markets. South Korean technology stocks faced heavy selling, driven by investors distancing themselves from chip manufacturers, while Chinese internet firms experienced notable gains. Meanwhile, the prospect of Democrats seizing control of Congress and potentially accelerating efforts to end the Iran conflict has exerted downward pressure on oil prices, strengthened U.S. bonds, and weakened the dollar.
Sharp Decline for Chip Stocks, Gains for Chinese Tech Firms
Fears over tighter regulations on U.S. data centers caused shares of Samsung and SK Hynix to plunge by more than 7%, dragging South Korea’s Kospi index down by 5.2%. The Nasdaq 100 futures also slipped by 1.2%, suggesting continued pressure on chip stocks during the U.S. trading session.
In contrast, Tencent and Alibaba stocks surged by over 6% each, driving Hong Kong’s Hang Seng Tech Index to a 5% gain, as Asian markets saw consumer-focused companies leading the charge. Among the top contributors were Toyota, Alibaba, and Sony.
Australia’s benchmark index rose by 2.5%, and India’s Nifty 50 climbed 1.8%. Meanwhile, Japan’s Nikkei 225 fell 1.6%, though the broader Topix index increased by 1.3%.
Iran Conflict Resolution Expectations Weigh on Oil Prices
Brent crude fell by another 0.7%, following a drop of over 8% the previous day, settling at $93.94 per barrel.
Investors are speculating that Democratic control of both congressional chambers could expedite efforts to conclude the nine-month-long Iran conflict, alleviating concerns about oil supply and adding pressure on prices.
U.S. Bonds Climb as the Dollar Weakens
U.S. Treasury bonds appreciated for the second consecutive day. This reflected expectations that declining oil prices might curb inflation, alongside predictions that the Trump administration’s tax and spending plans could be curtailed.
Interest rates along the yield curve fell by at least 2 basis points, with the benchmark 10-year yield dropping as much as 5 basis points during the day to 4.84%, marking its lowest since September 10. The dollar depreciated against nearly all G10 currencies.
Treasury’s Borrowing Plans Under Review
The U.S. Treasury Department signaled potential adjustments to its bond issuance guidance, used since early 2024. Hints of changes in auction sizes have prompted Wall Street strategists to reassess next year’s borrowing forecasts.
Market makers suggest this new guidance could pave the way for increased sales of short-term borrowing instruments while reducing long-term bond auctions.
Republicans Face Internal Strife After Election Defeat
The Republican Party’s substantial defeat in the midterm elections has spotlighted internal divisions. Criticisms directed largely at the White House provide a platform for potential candidates to shape their political narratives ahead of the 2028 elections.
Australia May Have Reached End of Rate Hikes
Economists and fund managers speculate that the Reserve Bank of Australia’s recent rate hike may conclude the most aggressive tightening cycle among developed economies this year. This sentiment coincides with reports suggesting tension within the monetary policy committee.
Market trends post-election indicate sectoral shifts rather than a general stock market upswing. Data center regulation pushes down chip makers, while declining oil prices support bonds. However, the downward momentum in oil is driven by expectations of political changes hastening a resolution, rather than concrete developments in the conflict.
