Following the Democratic victory in the U.S. midterms, global markets rallied as the prospect of restrained fiscal spending cooled Treasury yields and weakened the dollar. Stock indices across North America and Europe surged in response to the election results.
In North America, Wall Street recorded strong gains at the opening bell, with the Nasdaq rising 1.20 percent, the S&P 500 up 1.20 percent, and the Dow Jones advancing 1.95 percent. Mexico’s peso appreciated by 0.74 percent to trade around 18.6788 units per dollar, while the Mexican stock exchange followed Wall Street with a 1.64 percent gain to reach 71,331 points. Across the Atlantic, European shares climbed to their highest level in more than two months, led by a 1.2 percent advance in the paneuropean STOXX 600 index. The DAX German index and the French CAC 40 each rose more than 1%, while London’s FTSE 100 gained 0.9%.
Dollar Retreats as Precious Metals Climb Sharply
The dollar faced heavy divestment, with the DXY index retreating 0.52 percent to 101.360 units. Analysts explained that halting Donald Trump’s expansive fiscal policy could reduce pressure on U.S. debt and Treasury bond yields, diminishing the currency’s appeal. Meanwhile, precious metals climbed significantly, with gold rising 2.62 percent to 4 mil 42.95 dólares an ounce and silver advancing 4.46 percent. Oil prices also dropped sharply, with Brent crude falling 3.64 percent to $100.50 a barrel and WTI sliding 3.75 percent to $93.09. The price of the 10-year U.S. Treasury bond rose and its yield cooled around the 4.90 percent mark, sitting at 4.922 percent that morning, while U.S. stock index futures had initially pointed downward before turning positive.
Congressional Election Results Show Democratic Advances
The market response followed preliminary U.S. congressional election results showing significant Democratic advances, including control of the House of Representatives and a tight battle for the Senate. Investors noted that a divided government would limit unilateral trade tariffs and aggressive fiscal expansion. Analysts indicated that legislative proposals regarding spending and taxes are likely to stall under the new congressional alignment.
Defense Stocks Decline Following United States Exposure
BAE Systems dropped about 4%, while Chemring and Avon Technologies, both with high exposure to the United States, retreated 3% and 2.4%, respectively.
