Markets surprisingly sanguine after midterms bring on change

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Midterm elections and the change in the USA’s political landscape hogged the limelight today but concerns that the stock market would fall out of bed if President Trump lost the support of both US legislative Houses proved unfounded.

Although the dollar weakened as the vote rendered the US lower House predominantly Democrat while Republicans extended their majority in the Senate, stocks traded comfortably higher with the Nasdaq gaining 1.7% by London close and the DJIA bouncing up by 270 points. The new political landscape will herald some changes like a possible bout of investigations into President Trump including scrutiny of his tax bills and the ongoing suspicion of collusion with Russia during the last presidential election. But with a number of financial policies, the two parties are actually not that far apart and bills boosting investment in infrastructure are set to keep stock markets happy.

European indices had started the day optimistic about the results, with the FTSE gaining ground on the back of stronger gold and metals prices and the markets ignoring the effect of the stronger pound.  

Gold perks up but there is no “crisis” buying

In other markets gold, the go-to asset at times of political crisis gained some ground but nothing that would indicate a flight from other assets or serious risk aversion. The greenback was probably the worst hit on concerns that the rally it has enjoyed this year because of President Trump’s fiscal stimulus is about to come to an end, especially if Trump has to battle with the House of Representatives to pass certain financial legislation.

Oil prices seesaw on stock levels, OPEC hints

Oil prices seesawed on the day, in trading unrelated to the US elections, first heading downwards because US crude supplies have continued to rise now for almost two full months. But OPEC rectified all that saying they are pondering production cuts to prop up prices – a discussion that will be on the agenda of the cartel’s meeting in Abu Dhabi this weekend. Front-month Brent crude was trading at $72.12 this evening.

Merkel’s potential successor steps onto the stage

The fuss over the midterms has obscured the highly significant change of the political guard in Europe as Angela Merkel’s favourite candidate to become her successor stepped onto the scene. Annegret Kramp-Karrenbauer has launched her campaign for the leadership of Merkel’s Christian Democrat party saying that although she would bring a different style of leadership she still plans to keep her predecessor’s political legacy alive. Whether she will really be the one to carry on Merkel’s political baton remains to be seen, because she still needs to defeat 11 other candidates at the party’s conference in Hamburg in December.