Futures Rip As Wall Street Buys The Blue Tsunami; Dollar Slides, Gold Tops $4,000
Futures Rip As Wall Street Buys The Blue Tsunami; Dollar Slides, Gold Tops $4,000
US futures are higher as dip buyers turned an overnight "blue tsunami" puke into a broad rally: Democrats swept both chambers of Congress, initially sending Nasdaq 100 futures down as much as 2.4% on fears of tighter AI regulation and a Texas data center freeze, before President Trump's conciliatory tone ( he said Democrats did "a good job" and that he can work with them ), AMD's blowout guide and the monetization of a pile of election hedges flipped futures solidly green; as a result the dollar is heading for its worst day since early September while gold blasts back above $4,000. As of 8:15am ET, S&P futures are 0.9% higher at 7,665 while Nasdaq futures are down 0.2%, Russell 2000 futures jump 1.3% and Dow futures are up roughly 1.7%, or about 870 points, as VIX tumbles 12.8% to 18.16. Stocks rose on Tuesday ahead of the vote, with the S&P 500 snapping a three-day losing streak and semis rebounding 2.6% after an 11.6% three-session plunge. In premarket trading, the Mag 7 is mostly higher led by Amazon, while Musk's Tesla and SpaceX bear the brunt of the blue wave; AMD (+6.3%), Super Micro (+9.2%) and Arista (+10.9%) lead chips higher after earnings, confirming our article from last night , while solar names soar and defense stocks slide. The day's driver is politics (finally): Democrats flipped Senate seats in Texas, Ohio, Kansas, South Carolina, North Carolina, Iowa and Maine, won the governorships of Texas, Ohio and Georgia, and are on track for at least 54 Senate seats; as we explained overnight, Texas turned blue and futures turned green as the market concluded the AI fallout would mean regulation rather than cessation. Treasuries are bid with yields 3-5bps lower and the 10Y at about 4.915% as divided government curbs the fiscal outlook and the curve flattens ahead of the 8:30am refunding announcement. The Bloomberg dollar index slides 0.5% to the lowest since Sept. 30, with the kiwi leading G10 gains and EUR/USD up 0.6%. In commodities, WTI is down about 1% near $95 as Trump played down the prospect of imminent strikes on Iran, while gold jumps 3% and silver surges almost 5%; copper is flat. Bitcoin rises about 1% to $78,480. US economic data slate includes October ADP employment change (8:15am), September trade balance (8:30am), October final S&P Global services and composite PMIs (9:45am) and ISM services (10am). There are no Fed speakers scheduled. The Treasury publishes its quarterly refunding announcement at 8:30am and sells $75 billion of 17-week bills at 11:30am. In premarket trading, Mag 7 stocks are mostly higher: Amazon (AMZN) +3%, Meta Platforms (META) +0.8%, Microsoft (MSFT) +1.9%, Nvidia (NVDA) -0.1%, Alphabet (GOOGL) +0.9%, Apple (AAPL) +1.5% while Elon Musk’s Tesla (TSLA) falls 5% as election results sharpen investor concern over the future of the Republican megadonor’s key holdings. SpaceX (SPCX), while not a member of the Magnificent Seven, drops 6%, as election results sharpen investor concern over the future of the Republican megadonor’s key holdings. Some data center and cloud computing stocks slip after Democrats made strong gains in midterm elections, clinching control of both chambers of Congress. Gina Hinojosa is set to become Texas governor after a state-level race that Bank of America strategists had described as a “referendum on affordability versus AI data centers.” CoreWeave (CRWV), Equinix (EQIX), GE Vernova (GEV) and Oracle (ORCL) are among the decliners, while other AI-linked names are broadly higher Solar, defense and healthcare stocks are also moving on election results. Advanced Micro Devices Inc. (AMD) gains 1% after the chipmaker gave a sales forecast that soared past analysts’ projections, a sign of buoyant demand for data center processors. Amdocs (DOX) plummets 38% after the IT services company’s outlook came in weaker than expected, reflecting a dispute with T-Mobile. Array Technologies (ARRY) gains 9% after agring to combine with Shoals Technologies (SHLS). Block (XYZ) rises 10% after the payments company reported third-quarter earnings and revenue that inched past analysts’ expectations. CVS Health (CVS) slips 2% after the health insurer said it plans to spin off its retail pharmacy business. Duolingo (DUOL) rises 19% after the language-learning software company raised its full-year revenue and adjusted Ebitda outlook above consensus expectations. Flywire (FLYW) gains 7% after the payments software company’s third-quarter results beat expectations and it gave an outlook that is seen as positive. Freshworks (FRSH) falls 9% after the software company’s outlook was seen as underwhelming. The company also reported third-quarter results in line with expectations, below its historical pattern of greater upside. Navitas Semiconductor (NVTS) gains 14% after the chipmaker’s results and forecast beat expectations, prompting Rosenblatt Securities to upgrade the stock. Procore Technologies (PCOR) climbs 12% after the construction management software provider reported third-quarter revenue that topped Wall Street’s consensus. Skyworks (SWKS) slumps 10% after the company’s first-quarter revenue forecast missed the consensus estimates. Spyre Therapeutics (SYRE) falls 4% after the biotech said it does not plan to advance SPY072 in rheumatic diseases. Super Micro (SMCI) climbs 2% after the maker of servers forecast net sales for the second quarter that beat the average analyst estimate. In other corporate news, Oracle canceled a $7 billion chip leasing deal with Tencent under pressure from the Trump administration, the FT reported, which is one way to make the China decoupling trade official. CVS Health will break off its retail pharmacy business into a separate company and now sees FY adjusted EPS of at least $8.20 vs. a prior $7.90-$8.10 and consensus of $8.05. McDonald's Q3 comp sales rose 1.5% vs. est. +1.35%, while Uber sees Q4 gross bookings of $63.25 billion to $65.25 billion vs. est. $64.29 billion. HP Inc. named Emma Walmsley as CEO. Meta is making its debut in the euro bond market with a six-part offering, a day after raising $15 billion in dollars with orders for as much as $58 billion, as Big Tech keeps racing to fund trillions in AI investment. Alphabet's Google plans to spend $15 billion to expand data center and cloud operations in Malaysia. Amgen raised its sales and profit forecast for the third time this year, while Booking's Q4 outlook disappointed on softer international travel. In M&A, Carl Icahn's CVR Energy agreed to buy two refineries and a related marketing business from Marathon Petroleum for about $4.2 billion, and NextEra and Dominion offered Virginia additional concessions on their $67 billion merger. Elsewhere, Revolut confirmed a $115 billion valuation in its secondary share sale and Blackstone raised around €13 billion for European direct lending. The night was a rollercoaster: as results rolled in, S&P 500 futures were down as much as 1.4% and Nasdaq 100 contracts as much as 2.4% before both erased the losses , with Bloomberg's Michael Msika noting that investors "had been turning defensive and reducing positioning on tech for weeks into the elections, paving the way for the knee-jerk move lower overnight to morph into gains." In other words, the blue wave turned into a clearing event for bulls (for now), with the Nasdaq 100 bouncing after nearing oversold levels and testing its 200-day moving average. “It’s mostly opportunistic dip buying since we’re now past peak mid-term election uncertainty,” said Justin Lin, a strategist at Global X ETFs. “Now that we’re here, there will be optimistic buyers who are willing to pick up the pieces.” Not everyone was so sanguine: Bank of America's Michael Hartnett had predicted a Democratic sweep would be a risk-off moment with stocks, the dollar and yields falling into year-end, warning that a blue wave signaled an “electoral shift from populist capitalism to populist socialism,” with further tax and regulation likely. Invesco's David Chao took the other side of the macro argument: “Less fiscal stimulus could reduce upward pressure on US growth, inflation and Treasury yields, potentially easing some of the pressure that higher US rates and a stronger dollar have placed on Asian currencies and monetary policy.” Valuations are no longer much of an excuse to stay away: the Nasdaq 100 has nearly erased all its valuation premium to the S&P 500 , and with a forward P/E of around 19, absolute valuations are near the bottom of a 10-year range and well below the average of 23 over the period, according to Bloomberg. Meanwhile, the other big policy trade to watch is healthcare vs. financials: for months the market had been pricing a Democrat victory by boosting healthcare and dumping financials, which have been a Trump proxy ; that trade could now stabilize given headline risk for both sectors under a Democratic Congress. The biggest single overhang is Texas: data center developers seeking to build dozens of AI campuses across the state were already dealing with a suspension of approvals under Republican Governor Greg Abbott, and under Gina Hinojosa, the first Democratic governor of the Lone Star State in more than three decades, they are facing their worst-case scenario . Goldman's Jonathan Lightowler notes that Hinojosa said she will not lift the data-center permitting freeze until more comprehensive regulation passes, which could push gigawatts due online in 2027 into 2028, while GS Econ warns state-level Democratic wins are "likely to lead to short-term data center moratoria, potentially affecting about 45% of planned US data center capacity expansion," with Texas alone about 25%. GS utilities analyst Carly Davenport flagged the Texas result as a potential negative for VST, NRG, SRE and XEL. And yet the market shrugged: JPM's Market Intel desk under Andrew Tyler argues "fears emanating for a change in control in Texas were overblown given the multitude of other states where datacenters could be built" and that a change in control likely means regulation rather than a cessation of data center activity; still, the desk is "not yet comfortable saying that this marks the ‘All Clear’ to re-gross into the theme but it is another positive step." JPM stays Tactically Bullish, expects a Tech rebound and recommends a barbell of Tech and Cyclicals with a heavier weight on Cyclicals. JPM's Craig Cohen adds that the SPX has been up a year after every midterm election since 1950 with an average gain of around 15%. Over at Goldman, Rich Privorotsky had a similar take: "my gut is that AI infrastructure has been sold to death, and investors will start differentiating between the capacity that exists and the capacity that may never arrive," adding that "throttling the supply of compute doesn't necessarily destroy demand… it could just push pricing higher for longer." Goldman's flow desk (Sean Vogel) noted that "a lot of hedges were put on over the past few days that now need to be monetized", which goes a long way toward explaining the morning's melt-up. Lightowler summed up the political verdict: "Dems generally surpassing seat projections in what is now a clear 'blue tsunami' scenario." As for what comes next, GS Econ expects Democrats "to use fiscal deadlines to seek to limit the war with Iran, roll back selected tariffs, and reverse spending cuts enacted last year," with the first test on Dec. 11 when spending authority expires. Not to be outdone, Trump himself took a victory lap of sorts in defeat, saying he would have won in a landslide had he been on the ballot ( more here ), while noting that veto power is one of the strongest powers he has. On Iran, he said the US has no immediate plans to strike, even as Iran's leader warned of a "far wider" response to any further attack and the IRGC said four tankers were destroyed after striking mines south of the Strait of Hormuz. In Europe, the Stoxx 600 is up 1.2% at 653.58, with banks leading gains alongside renewables and miners, while energy, defense and tech lag; Spain and Italy lead the regional benchmarks with the UK lagging but still positive, while JPM notes baskets tied to Renewables, Ceasefire/Rebuild and EU Domestics are outperforming, with MidEast Escalation, Defense and Freight Rates lagging. Novo Nordisk jumped as much as 6.6% after its Wegovy pill sales beat and it boosted its outlook, while European defense names slid as investors pared bets on a further ramp-up in US military spending. Here are the biggest European movers: Novo Nordisk rises as much as 6.6% after the Danish drugmaker reported adjusted sales for its blockbuster Wegovy pill for the third quarter that beat estimates and boosted outlook. European renewables stocks jump after Democrats won control of both chambers of the US Congress in the midterm elections. Barclays analysts said the result eases political risk on US renewables and supporting networks. Continental shares rise as much as 6.7%. The auto parts manufacturer raised its guidance on adjusted Ebit margin and adjusted free cash flow, driven by higher sales of ultra-high-performance tires and a particularly strong showing in Europe. Marks & Spencer shares gain as much as 4.2% as investors welcomed “bullish” mid-term guidance and a strong first-half performance in food. While fashion, home and beauty delivered a miss, its performance is expected to improve in the second half. Ahold Delhaize shares gain as much as 4.3%. The Dutch retailer downgraded its full-year outlook, citing a cybersecurity incident which impacted the business in October which is expected to reduce fourth-quarter net sales by between €200 million and €250 million. Siltronic shares jump as much as 10% after the wafer maker raised its sales and Ebitda margin guidance, citing stronger demand and a volume increase that’s offsetting negative price trends. Metro Bank rises as much as 14% as Citi says the lender has delivered an “encouraging” third-quarter update. European defense stocks fall as investors revise down their bets on further ramp-up in military spending after results from the US midterms show Democrats are poised to sweep both chambers of Congress. DSM-Firmenich shares fall as much as 9% before paring losses after third-quarter results and an upgraded full-year sales outlook from the specialty chemicals firm failed to match raised expectations. Weir drops as much as 8.2% after the mining technology and equipment provider reported underwhelming order intake in the latest quarter, according to analysts. JPMorgan cut its price target on the stock. Asian stocks dropped to their lowest in over six months before reversing most of the losses as traders digested the US midterm results. Japan underperformed, with the Nikkei 225 closing down 1.4% at 62,188.63 after falling more than 3% intraday and the Topix down 0.9%, as Advantest, Tokyo Electron, SoftBank Group and Kioxia fell on AI regulation fears; Goldman's Asia desk said AI names fell 4.4% and semis 3.8%. South Korea's Kospi swung through a seven-percentage-point range, falling as much as 4% before closing up 0.6% at 5,683.80, with foreigners net selling $1.9 billion while solar and EV names soared (Hanwha Solutions +18.6%). China outperformed: the CSI 300 rose 2.3% and the Hang Seng gained 1.7% after the PBOC stepped up its stock repurchase and relending support, with Goldman noting the second-largest national team ETF inflow on record. Australia's ASX 200 fell 0.6% and Taiwan's Taiex slid 0.8%, after being down as much as 3.4% intraday. "Flows remained cautious across developed Asian markets, with institutional selling and de-grossing evident, while mainland China was supported by policy easing and strong national team ETF buying," Goldman's Jeremiah Khong wrote. In FX, the Bloomberg Dollar Spot Index falls 0.5% to the lowest since Sept. 30 and is headed for its worst day since early September, as a Democratic Congress is seen as lower growth, lower yields and more friction for Trump's agenda. The greenback is weaker against every G10 peer, with the kiwi leading (NZD/USD up as much as 0.8% to 0.5634) and EUR/USD up 0.6% to around 1.1259. The yen has lagged: USD/JPY trades in a 157.38-158.74 range, close to intervention territory, prompting Japan's Chief Cabinet Secretary Kihara to say authorities will monitor markets "with a high sense of urgency". The yuan slipped after the PBOC set a weaker fixing, which Goldman says was the largest one-day increase in the USDCNY fix since Aug. 18, a day after Beijing hiked the FX reserve ratio to slow the yuan rally. In rates, Treasuries advance into the early US session with yields 3bp to 5bp richer across the curve and the 2s10s spread around 2bp flatter, as the prospect of divided government curbs the Trump administration's tax and spending plans; the 10-year, close to 5bp lower around 4.915%, outperforms bunds and gilts by 4bp and 2bp respectively. At the overnight peak, the 10Y was down as much as 7bps before paring when Trump struck a conciliatory note. All eyes are now on the 8:30am quarterly refunding announcement, where many dealers expect the issuance guidance to be altered; Goldman expects 10-to-30-year auction sizes to be held steady with 2-to-7-year increases starting in May 2027 and warns that a market leaning toward long-end cuts leaves "scope for disappointment." European bonds tracked Treasuries higher after the clean Democratic sweep eased concerns about Trump's fiscal plans, with the French 10-year yield down 5bps to 4.90% early and the 10-year gilt yield falling 5bps to 5.21%, even as euro-area inflation accelerated to 4.0% in October, double the ECB's target. The IG dollar issuance slate is empty so far (Meta already did its $15 billion on Tuesday), and there are no Fed speakers to distract from the refunding. “Upside risk to today’s core euro zone HICP could put temporary pressure on markets, but we stick with our view to continue buying Bund dips for the time being,” Hauke Siemssen, rates strategist at Commerzbank, wrote in a note. In commodities, WTI for December is down about 1% near $95, trading in a $94.60-97.15 range, while Brent for January fell 1% to $102.55 after sliding from a high of $104.96, as Trump played down the prospect of imminent strikes on Iran and traders bet a Democratic Congress will work to end the conflict; crude bounced off worst levels after Iran's leader warned of a much broader response if the US repeats its aggression, and the IRGC said four tankers were destroyed after striking mines south of the Strait of Hormuz. The API reported US crude inventories fell 5.3 million barrels last week. Spot gold surged 3% to about $4,047/oz and silver jumped 4.8% to $52.19 as the dollar and yields slid, while LME copper is flat after recovering from an overnight drop on AI regulation fears. Dutch TTF gas is firmer after the IEA warned European gas reserves are at their lowest since 2013. Looking at today's calendar, US economic data slate includes October ADP employment change (8:15am), September trade balance (8:30am), October final S&P Global services and composite PMIs (9:45am) and October ISM services (10am); JPM's Michael Feroli expects the ISM composite to improve to 55.5 from 54.9, while Goldman sees 54.9. The Treasury quarterly refunding announcement is at 8:30am and the Treasury sells $75 billion of 17-week bills at 11:30am. There are no Fed speakers scheduled. CVS, McDonald's, Uber, Datadog, Emerson, Kraft Heinz, Circle and Flutter report before the open, while Qualcomm, AppLovin, Snap, Expedia, MetLife and Allstate report after the close. Market Snapshot Top Overnight News Democrats swept the House and Senate in midterm landslides as voters rebuked Donald Trump over the economy and the Iran war. BBG President Donald Trump congratulated Democrats for doing “a good job” after the party inflicted devastating defeats on his Republican allies, winning back both houses of Congress and picking up several governors’ mansions. BBG The president now faces a grueling second-term reality as a lame duck: endless subpoenas, legislative gridlock and a shrinking window to secure his legacy. BBG GIR on Midterms: Democrats have won the majority in the House and Senate. The larger-than-expected majorities could give them slightly greater leverage in negotiations with the White House, but will also dilute the influence of small factions within the Democratic caucus. We expect Democrats to use fiscal deadlines to seek to limit the war with Iran, roll back selected tariffs, and reverse spending cuts enacted last year. GIR Data center developers seeking to build dozens of sprawling artificial intelligence campuses across Texas were already dealing with a suspension of approvals under Republican Texas Governor Greg Abbott. Under Gina Hinojosa, elected on Tuesday as the first Democratic governor of the Lone Star State in more than three decades, they’re facing their worst-case scenario. BBG Elon Musk’s Tesla and SpaceX shares fell premarket as results fanned concerns about tighter AI regulation and called into doubt a potential merger. CoreWeave and data center hardware supplier stocks including TSMC, Samsung Electronics and SK Hynix also fell. BBG Among all the market gyrations triggered by the US midterm elections, few were as wild as those in South Korea, where the stock benchmark swung through a seven-percentage-point range before ending higher. BBG The US has no immediate plans to strike Iran, Donald Trump has said, as the president played down speculation that he was preparing to escalate his conflict with the Islamic republic after the midterm elections. FT Tehran and Washington are reviewing fresh proposals from mediators on how to resolve their differences and avoid a return to all-out war, according to a diplomat briefed on the matter, after limited US airstrikes. BBG Chinese AI firms expect to receive only around 1% of about $70 billion worth of Nvidia RTX Pro 5500 chips over the next four months, people familiar said. BBG Oracle (ORCL) cancels USD 7bln Tencent (700 HK) AI deal under Trump pressure: FT Euro-area inflation quickened to 4% in October, double the ECB’s target and the highest since September 2023. BBG Euro-area pay growth is poised to slow sharply in the third quarter of 2027, encouraging news for the European Central Bank as it battles inflation driven by the Iran war. BBG Sweden’s Riksbank raised its key rate to 2% from 1.75% and opened the door to another move. Poland’s central bank looks set to keep its rate unchanged at 3.75% as the country’s political standoff raised fresh doubts about the future of Governor Adam Glapinski. BBG Canadian Prime Minister Mark Carney said the US is “asking less” and “offering more” in trade negotiations, as the neighboring nations once again work on a potential deal after a previous round of talks collapsed. BBG North Korea fired multiple missiles toward its east coast hours after urging the US to drop its “hostile” policy, adding pressure on Trump. BBG CVS Health is planning to spin off its retail pharmacy business into a separate company. BBG Meta is making its debut in the euro bond market, joining a burst of borrowing by the world’s biggest technology companies as they race to finance trillions of dollars of investments in artificial intelligence. BBG White House releases Trump proclamation regarding space and stated that the US is to return to the moon by 2028 under the Trump order. Newsquawk The S&P 500 has been up a year after every midterm election since 1950, with an average gain of around 15%; on a 3-month basis the SPX has averaged a +5.4% return. JPM (Craig Cohen, Market Intel) A more detailed look at global markets courtesy of Newsquawk US Midterm Elections In short, Democrats are projected to have flipped both the House and Senate from the Republicans. The trade began as expected, with the USD softer (overnight, DXY -0.6%, G10s firmer across the board, CHF and JPY led) and USTs bid throughout this, weighing on the US 10yr yield by c. 5bps. Big tech/AI names were initially all hit on this, with those supporting the trade (e.g. energy, components, etc) also suffering; NVDA, MSFT, META, GOOG, etc. Banks (JPM, GS) dented by the regulation narrative, which weighed on crypto-sensitive stocks too, COIN. On the flip side, the Dem. trade is supporting healthcare names (UNH, CNC, HCA) and some retail stocks (WMT, DG). However, some of the local (PUC/PSC) results were then called Republican in key areas; the most pertinent thus far being Louisiana District 5, which has three Amazon facilities planned, and potentially helped spur the easing of pressure seen in such names in the early hours. Though, the PSC results for Georgia potentially offset this given the data centre exposure in the region. Democrats flipped key Senate races (Ohio, Texas, South Carolina, Kansas) and are eyeing a potential 54-seat plus Senate majority, meeting the high end of Democratic projections going into the elections. The Kansas and Texas wins are the most historic, with Democrats last winning a Senate race in Kansas in 1932 and in Texas in 1988, while an RCP analyst wrote regarding the Republicans' performance that it was "Easily the worst election for a party since 1974." US President Trump said he is prepared to work with Democrats and will accept the election result, according to the NYT. In a Truth Social post, he stated that he would have won in a landslide if he were on the ballot, while he thought some candidates would have done better. On Fox, he outlined that veto power is one of the strongest powers he has and that part of the result was Iran, adding that the US was probably not ready for the short-term gasoline consequences of the Iran conflict. Furthermore, he said he could work with the Democrats on many things, such as immigration and will not make cabinet changes. Iran is, of course, the main risk in the near term, with the focus points around that familiar and centred on the upcoming weekend. For the results, the next major one is Alaska on the Senate. Mississippi is also yet to be called. APAC stocks were somewhat mixed, with risk assets hit early in the session as participants digested the results from the US Midterm Elections, which pointed to a strong performance by Democrats, as betting markets priced a 99% probability of a Democrat sweep, in which some of the notable victories include North Carolina, South Carolina and Texas senate seats, marking the first Democrat win in the latter state since 1988. ASX 200 declined as the downside was led by the mining, materials and resources sectors, although the losses in the broader market were somewhat cushioned by resilience in defensives and consumer stocks. Nikkei 225 underperformed as tech was pressured on prospects of tighter AI regulation associated with what looks increasingly to be a blue wave following the Midterm Elections, but is well off today's lows. KOSPI suffered amid the tech sell-off, while there were reports of North Korea conducting launches. Hang Seng and Shanghai Comp weathered the stock sell-off in the region amid reports that the PBoC steps up stock repurchase and increased holdings and re-lending policies, while Chinese markets are also likely finding some solace as the increased likelihood of a Democrat sweep could restrict Trump tariff policies. Top Asian News Japanese Chief Cabinet Secretary Kihara said authorities will closely monitor market movements with a high sense of urgency. European bourses (Stoxx 600 +0.9%) start Wednesday’s session entirely in the green, with focus being on the US midterms overnight. Focus has been on Novo Nordisk (+4%), after it lifted its sales and profit guidance for the FY to growth of as much as 2%, from a prior forecast of a decline of as much as 6%, helped by optimism over its Wegovy pill. For its new pill, sales beat analyst estimates, with Novo highlighting that it should be available in over 20 markets in 2027. Turning to US equity futures, the ES was down as much as 1.4% overnight but has since reversed, with all futures benchmarks in the green heading into pre-market trade. Very brief pressure was seen at the start of pre-market, but that has since reversed. Post mid-terms, key spaces to watch are: Health Care, Energy and Defence. For Health Care, less cuts to Medicaid are now expected with a possible restoration of ACA subsidies. As a result, UNH gained early doors, but has since reversed to post pre-market losses of c. 0.7%; HCA (+2.4%) holds on to earlier gains. Turning to Energy and Utilities, there is particular focus on Texas, as the Democratic win puts ERCOT power deregulation at risk. FSLR is higher by 9.2% pre-market, with European peers also firmer (Orsted +7%, Vestas +5%). Finally, the prospect of trimmed funding for defence will provide a headwind for US defence names, with LMT lower by 2.9% pre-market, while BAE Systems is slumping over 3.6% given its high exposure to the US. Top European News German Engineering Orders (Sep) +14% Y/Y (Domestic Orders +22%, Foreign Orders +11%), (Jul-Sep) +4% Y/Y (Domestic Orders +5%, Foreign Orders +3%); (Jan-Sep) +5% Y/Y (Domestic Orders Unchanged, Foreign Orders +7%), VDMA said. FX USD under pressure against all G10 peers. The NZD holds towards the top of the pile, whilst the JPY is only mildly stronger against the Dollar. Overnight, USD was pressured as initial projections suggested a Democratic sweep, and more so than what market participants had expected, with several states surprisingly swinging from R to D. Heading into the midterm elections, it was widely viewed that a D majority in both House and Senate would be USD-negative, given the lower growth implications, lower yields and added friction in passing policy. This price action played out largely overnight, with significant selling pressure in the Dollar index, taking it to a session trough of 101.24 (vs 101.73 peak). Whilst the USD weakness has continued into the European morning, G10 peers flipped from displaying a risk-off tone, to a risk-on one. The Kiwi outperforms vs peers, joined closely by the Aussie. A shift which comes after two main points: 1) Republicans winning the Louisiana race, and 2) President Trump sounding fairly conciliatory regarding the D projected victory, indicating openness to work with the opposition. This has perhaps abated some woes surrounding political friction, spurring some risk-on trade. Nonetheless, the USD remains pressured as yields remain lower on the session. JPY has not been able to benefit quite as much as some of its other G10 peers. USD/JPY currently holds within a 157.38 to 158.74 range, sitting close to intervention territory. As such, markets were met with jawboning via Japanese Chief Cabinet Secretary Kihara, who noted that authorities will closely monitor market movements with a high sense of urgency. Some market participants may also be thinking about the potential loosening of US-Japan relations following the Dems' strong performance. This perhaps will be a longer-term theme, but remains a risk heading into 2027 and 2028, where the presidential elections will come into view. Central Banks Riksbank raises its policy rate by 25bps to 2.00%, as expected; If the outlook for inflation and economic activity holds, it is likely that the policy rate will be raised further in the coming year. ECB Wage Tracker - Annual, 2026: 2.3% (prev. 2.2%). Quarterly, Q3-2027: 2.4% (1st estimate). PBoC steps up stock repurchase and increased holdings and re-lending policies, adds application for relending has exceeded CNY 200bln. Fixed Income Fixed income was initially bullish as the US midterms pointed to a Democratic sweep, with both the House and Senate projected to have shifted blue. However, this then unwound to a degree, though USTs are back in the green once again. Specifically, the early-APAC projections showing Democrats flipping multiple major Senate races, including Texas, helped to lift USTs to a 106-30 peak, with gains of 15 ticks or so at best. Then, as Trump expressed an openness to working with the Democrats, some key local (PUC/PSC) results went in favour of Republicans and, more generally, on a broader fading of the initial Dem. reaction, with many commentators describing it as overdone, a pullback was seen, to a 106-18 overnight low but clear of the 106-12+ late-US base. As it stands, USTs are off that base and post gains of a handful of ticks, with geopolitics and the QRA in focus. As above, market attention is already turning back to the Middle East, given the potential for kinetic action by the US against Iran into/during the weekend. On the docket, we have a handful of data prints and the QRA, which may see an update to the long end and/or 20yr specifically. Amidst this, EGBs have been directionally in-fitting until the European morning at least. Bunds hit a 122.42 overnight low alongside USTs, before then rebounding modestly to gains of c. 10 ticks. However, while USTs remain bid, Bunds have slipped into the red once more and to a 122.29 session base. The morning’s regional weather data turned colder once again, and the traditional haven narrative may be factoring in, as European equity futures (and since cash bourses) climbed. Gilts digested most of this at the open. Started the day lower by a handful of ticks, before lifting to an 86.13 peak with gains of about 20 ticks. Since, in line with USTs for the most part. UK specifics light. Germany sells EUR 1.66bln vs exp. EUR 2bln 2.60% 2041 and 1.25% 2048 Bund. Meta (META) begins the sale of its EUR-denominated bond offering (six-parter). Australia sold AUD 400mln in 5% June 2036 bonds, avg. yield 5.075%, b/c 4.19. HSBC (5 HK) has issued USD 1.75bln of 5.819% fixed/floating rate senior unsecured notes due 2032 and USD 2.5bln of 6.262% fixed/floating rate senior unsecured notes due 2037. Commodities Crude benchmarks were initially firmer in early morning trade, but gradually dipped as the session progressed. Focus overnight was on comments via US President Trump, who told the FT there is no immediate plan to strike Iran, alongside the initial Democratic sweep trade, before recovering as that trade faded. WTI Dec'26 trades within a USD 94.60-97.15/bbl range (vs yesterday's USD 93.59-98.82/bbl range), while Brent Jan'27 moves within a USD 101.55-104.96/bbl range (vs yesterday's USD 100.80-107.24/bbl range). Most recently, crude benchmarks have bounced off worst levels after the Iranian leader warned of a broader response if the US repeats its aggression. Focus remains on the Strait of Hormuz and the potential for US strikes. The IRGC said four tankers were destroyed after striking mines south of the Strait and two other vessels were detained, while Tehran's Mayor said the Strait will not reopen until the US fulfils its commitments. CCTV reported that Tehran remains far from reaching an agreement with the US (in line with yesterday's reports), while Trump said "if Iran behaves, then we can sign something up". As a reminder, US Central Command reportedly has a plan to strike Iran as early as Wednesday. Dutch TTF is firmer within a EUR 91.75-94.50/MWh range, after the IEA warned European gas reserves are at their lowest since 2013. Spot gold surges to levels above USD 4,000/oz, within a USD 3,920-4,049/oz range (vs yesterday's USD 3,896-3,971/oz range), as the Democrats' projected sweep of Congress weighs on the USD and US yields, with markets pricing in a greater chance of legislative gridlock and downside risks to growth, while the complex could also be seeing hedging demand ahead of potential US strikes on Iran. Spot silver outperforms within a USD 48.97-51.98/oz range (vs yesterday's USD 48.62-50.87/oz range), while platinum and palladium futures are also firmer. 3M LME Copper is flat within a USD 13,832.48-14,084.00/t range (vs yesterday's USD 13,896.05-14,286.35/t range), having declined overnight as risk assets were hit on the increased prospects of a Democratic sweep and concerns over tighter AI regulation, in turn initially hitting data-centre-driven copper demand. The red metal has since recovered to flat as those concerns eased, with Republican wins in the Louisiana PSC races supporting the data-centre narrative and the Democratic trade fading, while the softer USD also provides some support. Marubeni (8002 JT) CEO expects the copper market to stay firm over the mid to long term, backed by strong demand from data centres and AI. Brazil confirms another outbreak of Newcastle Disease at a poultry establishment in Santa Catarina state. US Weekly Private Energy Inventory Data (bbls): Crude -5.3mln (exp. +1.9mln), Gasoline +1.4mln (exp. 0.0mln), Distillate -1.2mln (exp. +0.4mln), Cushing +0.5mln. Geopolitics: Iran US President Trump said US has no immediate plan to strike Iran, according to FT. Trump suggested he was content with the state of the stand-off with Iran, even as he signalled he was prepared for more war if necessary, while he stated we seem to be getting everything we want. Trump responded "We’re locked and loaded if we need to go, but there may be no reason for it”, when asked about strong hints by Israeli PM Netanyahu that there would be an attack later this week. Iran's leader warns of a much broader response if the US repeats its aggression, while dismissing expectations of a change in US behaviour following the midterm elections, Fars reports. IRGC political affairs official said Iran will expel the US from West Asia and the Persian Gulf, Al Alam reported. IRGC commander adviser said Iran would respond to any US or Israeli attack with a new doctrine and technology, warning that retaliation could extend beyond US bases in countries such as the UAE and Bahrain, NAYA reported. Warns if countries such as the UAE and Bahrain allow US forces to use their bases to attack Iran, Tehran's retaliation would extend beyond those bases. Iran's Tehran Mayor Zakani said Iran has not sought nuclear weapons, but unconventional threats could prompt a change in the country's nuclear doctrine under the leadership's direction, Fars News reported. The Strait of Hormuz remains under the full control of the IRGC and Iranian military and will not reopen until the US fulfils its commitments, Tasnim reported. IAEA chief Rafael Grossi said no nuclear activity or equipment was found inside Pickaxe Mountain during the agency's last inspection and stated that Tehran does not possess a nuclear weapon, Iran-linked Sabereen reported. Iran describes US President Trump's midterm election defeat as another sign of Iran's victory in the war, while stating that Tehran's policies will remain unchanged regardless of which US party holds power, IRGC Telegram posted. Iran is reportedly adopting guerrilla tactics, including rocket-propelled grenades and limpet mines, in an effort to reassert control over the Strait of Hormuz and disrupt oil shipments from the Persian Gulf, according to WSJ. Iran's President Pezeshkian said Iran won't bow to coercion or imposed demands, according to Press TV. IRGC said four tankers were destroyed after striking mines south of the Strait of Hormuz and that two other vessels were detained. Satellite images show a fire in the Strait of Hormuz; a ship appears to have been targeted. A senior Iranian official said yesterday Tehran remains far from reaching an agreement with the US to end the conflict, despite mediation efforts, CCTV reported citing unnamed sources. Geopolitics: Ukraine Russia hits power stations in Ukraine's Kyiv and Zhytomyr regions. Geopolitics: Other Saudi Civil Defence said a warning has been issued by the National Early Warning Platform in Najran. Yemeni armed forces reportedly target sites in southern Saudi Arabia, Sabereen reported. US President Trump said he spoke with Israeli PM Netanyahu about money and support, while Trump adds that Netanyahu agrees with him. South Korean military said North Korea fired multiple missiles from the Sondok area. South Korea military said North Korea fires an unidentified projectile. US Event Calendar 7:00am: Oct 30 MBA Mortgage Applications, prior 3.4% 8:15am: Oct ADP Employment Change, est. 67k, prior 90k 8:30am: Sep Trade Balance, est. -$107.9b, prior -$105.6b 8:30am: US Treasury Quarterly Refunding Announcement 9:45am: Oct F S&P Global US Services PMI, est. 57.9, prior 57.9 9:45am: Oct F S&P Global US Composite PMI, est. 57.3, prior 57.6 10:00am: Oct ISM Services Index, est. 54.8, prior 54.9 11:30am: US to sell $75 billion of 17-week bills Central Bank Speakers No Fed speakers scheduled DB's Jim Reid concludes the overnight wrap The big news this morning is that the Democrats have made significant gains in the midterm elections, with multiple news organisations projecting they’ll win both the House of Representatives and the Senate. The gains have been substantial, and the AP have already projected they’ll pick up Senate seats in North Carolina, South Carolina, Ohio, Kansas, Iowa and Texas from the Republicans. Moreover, the New York Times needle is now pointing to a 55-45 Democratic majority in the Senate when all is done, which if realised would leave them with 8 gains. In fact, the last time the Democrats had a Senate majority that big was after the 2012 election, when Barack Obama won a second term. Although votes are still being counted, this means that when the new Congress convenes in January, it will be the first time the Democrats have controlled both chambers since the first two years of Joe Biden’s presidency. In addition, it’s the first time in either of the two Trump administrations that the Democrats have both the House and the Senate, as in Trump’s first term, the Republicans still had a Senate majority after the 2018 midterms. So this will add to the constraints on the Trump administration. Most obviously, a major constraint is that all legislation must be passed by a majority in both chambers of Congress, so any new laws will require at least some Democratic support. That includes spending packages to prevent a government shutdown, as well as any increases in the debt ceiling. Remember as well that the Senate is the chamber that votes to confirm new appointments, including for the Cabinet, Supreme Court Justices, and Fed Governors. So this will be the first time in either of Trump’s terms that Democrats could block appointments to key positions. Nevertheless, Trump still retains a veto over legislation, so even if Democratic majorities passed something through both chambers, Trump’s veto could only be overridden if two-thirds of both chambers agreed. In terms of the results so far, the direction of travel became clear early in the night. For instance, AP have said the Democrats have already made 22 pickups in the House so far, well above the 3 gains required to take the majority. That currently leaves them on 205-123 on the AP count, with 218 needed for the majority. So even though they haven’t reached the majority line yet, multiple news networks are already projecting a Democratic win in the House, including CNN and NBC. Then in the Senate, the 6 Democratic gains so far mean they’re already over the majority line, with the AP count currently at 52-41. And elsewhere, the Democrats have also made gains in the Governor’s races, with AP projecting Democratic pickups in Ohio, Iowa, Georgia and Texas. When it comes to the market reaction, there’s been a clear selloff in US equity futures, led by the tech sector. In part, that reflects investor expectations that Democratic control in Congress might lead to tougher regulation on AI, and futures on the S&P 500 are down –0.42% this morning, whilst those on the NASDAQ 100 are down -0.49%. However, S&P futures were down over -1% earlier, so they’ve pared back a decent chunk of those earlier losses, and there’s been a rally for US Treasuries as well, given that divided government has generally made it harder for fiscal stimulus to be passed. So that’s eased concerns on the fiscal trajectory a bit, and the 2yr Treasury yield is down -3.5bps overnight to 4.60%, whilst the 10yr yield is down -2.9bps to 4.94%. Investors are also pricing in a more dovish path for the Fed too, with the amount of rate hikes priced by the June 2027 meeting down -3.3bps this morning to 55bps. So that’s pushed the dollar index down -0.40% overnight as well. In Asia, there’s been a similar pattern overnight, with several of the most tech-exposed indices posting sharp losses, although they’ve recovered from earlier in the session. Nevertheless, Japan’s Nikkei is currently down -2.09% this morning, whilst South Korea’s KOSPI (+0.03%) is now basically flat, but was down more than -4% at the lows earlier. Meanwhile other indices have posted gains, including the Hang Seng (+0.89%), the CSI 300 (+1.02%) and the Shanghai Comp (+0.83%). Before we knew about the midterm results, a bit more positivity crept back into markets yesterday. Most notably, oil prices continued to fall after Iran’s President Pezeshkian said that the country’s Supreme Leader had granted “additional authority”, which would allow talks on issues previously considered “non-negotiable”. Moreover, Reuters also reported that Qatari mediators expected feedback from the US and Iran on a new proposal to advance talks within 36 hours. So that added to the optimism about some kind of diplomatic resolution, and Brent crude oil prices fell -1.12% over the session to $103.60/bbl. And there was a decent decline in European natural gas too, which came down another -3.44% to €91.60/MWh. However, there were still some signs of caution, and oil prices picked up from the lows after the Secretary of Iran’s Supreme National Security Council said on X that “The US response to Iran’s rights and demands was not satisfactory”. And then soon after, Iranian state TV cited a spokesman for Iran’s negotiating team, who said that no new developments had been reached on an agreement. That backdrop helped US equities to finally stage a recovery, with the S&P 500 (+0.36%) picking up after 3 consecutive declines. That was led by the tech sector, with the NASDAQ (+0.83%) posting an even bigger advance, whilst the Philly semiconductor index (+2.63%) rebounded after falling by -11.6% over the previous three sessions. And to help matters further, the latest data pointed to ongoing resilience around the US economy. For instance, the JOLTS report showed job openings rising to a 4-month high of 7.523m in September (vs. 7.164m expected). Meanwhile, the quits rate of those voluntarily leaving their job hit a 15-month high of 2.1%, and separate data on factory orders showed growth of +1.8% in September (vs. +1.2% expected). With that hawkish data in hand, that cemented investor confidence that the Fed would deliver another rate hike at their next meeting in December. Indeed, futures raised the probability of a hike from 74% to 78% by the close yesterday. And in turn, that hawkish momentum and risk-on sentiment helped to push up Treasury yields as well. So the 2yr yield (+3.6bps) was up to 4.63%, whilst the 10yr yield (+5.1bps) rose to 4.96%. Over in Europe, investors also became more confident that the ECB would hike rates in December, with market pricing for a hike next month up from 83% to 89% by the close. That followed comments from the ECB’s Radev, who said that “If incoming data confirm inflationary pressures are becoming more persistent, further rate increases may be necessary”. This was also echoed by Nagel, who said “there is likely no way around an interest-rate hike unless the inflation outlook improves significantly” and Kocher was suggested that a December hike was likely if the situation does not change. So that supported investor conviction that the ECB would still deliver a December hike, and yields on 10yr bunds (+3.8bps), OATs (+5.1bps) and BTPs (+3.8bps) all moved higher. However, European equities underperformed their US counterparts, largely as they caught up to the late selloff in the US session the previous day, with the STOXX 600 closing -0.58% lower. And this morning, European equity futures are also trading lower, with those on the STOXX 600 down another -0.66%. Looking at the day ahead now, data releases include the Euro Area flash CPI print for October, and in the US there’s the ISM services index for October, the ADP’s report of private payrolls for October, and the trade balance for September. Otherwise, we’ll get the final October services and composite PMIs from multiple countries. From central banks, we’ll hear from the ECB’s Lane and Moulin. Finally, earnings releases include Qualcomm, McDonald’s and Uber.
Tyler Durden
Wed, 11/04/2026 - 07:28