Markets across the globe rallied following the expected results of the United States (US) mid-term elections on Wednesday.
The mid-term elections which saw a record attendance, saw Democrats taking control of the House of Representatives and the Senate kept by the Republican Party. The winning of the House for Democrats will be a downer to US President Donald Trump’s legislative plans, which to some parties are viewed as confrontational and exclusionary for a country.
European shares saw gains on Wednesday, with the pan-European Stoxx 600 benchmark closing 1.0% higher, and the FTSE 100 – United Kingdom’s (UK) premier benchmark index - 1.1% higher at 7,117.28. Major sectoral indices in the region also saw winnings.
Over at Wall Street, stocks rallied with the results of the mid-term elections. The Dow Jones Industrial Average got a 2.1% increase, up more than 500 points at 26,180.30, the highest in almost a month. Nasdaq rose 2.6% to 7.570.75 points and S&P 500 rose 2.1%, at 2,813.89 points.
Unsurprisingly, Japan stocks opened higher on Thursday, following the bull run from US and UK shares. The benchmark Nikkei 225 was up 1.58% or 348.68 points in early trade, while the broader Topix index was up 1.46%. Malaysia and Singapore stocks also opened higher.
Hong Kong’s Hang Seng Index opened the morning’s session higher, up 1.01%, or 262.81 points, at 26,410.50 in early trade, while China’s Shanghai Composite Index rose 0.26% or 6.68 points, at 2648.19.
Divide and conquer
Democrats have captured 27 seats so far for the House, with a few races still on the count. The House has a total of 435 seats, and Mr Trump belongs to the Republican Party.
A divided Congress will put a halt any major advances in Mr Trump’s economic agenda. The split will not see new major economic policy changes taking place, which will be a relief for the US to focus on its economic growth and corporate earnings.
According to analysts, a divided Congress has been historically good for equities, as it creates balance in policy making. A Congress concentrated with Democrats would affect the progress of Mr Trump’s policy agenda, while one that has more Republicans could lead to more tax reliefs for businesses with its business-friendly policy approach and be a drain on US’ fiscal outlook.