Dollar falls while gold and US Treasury bonds rally as markets react to Democrats’ midterm election victory – business live

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  'Blue wave washes over US, futures recover', analysts say

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  Introduction: Dollar falls while gold and US Treasury bonds rally as markets react to Democrats’ midterm election victory

Chris Beauchamp, chief market analyst at the investing and trading platform IG, says:

Overnight markets had pointed towards steep losses for futures, but the picture is looking rosier as markets seem to look towards the future with relish.

A divided US government has often been the best outcome for markets, and we are staring that squarely in the face today. Gold and silver are up, while volatility has reversed course too. All eyes are on the White House now, but Trump’s apparent acceptance of the results at least suggests a nasty litigation battle (or worse) is off the cards.

And Axel Rudolph, chief technical analyst at IG, adds:

Midterms rattle Trump, send dollar lower and bullion higher: The heavy Republican defeat is a stark reminder that even a president who dominates the political conversation is not immune to voter discontent.

The scale of the losses will inevitably raise questions about Trump’s ability to push through his agenda over the next two years, and markets are already reacting. The dollar is under pressure as investors reassess the political outlook, while gold and silver are benefiting as safe haven plays.

A divided government may ultimately prove manageable for markets, but the immediate message is clear: investors are becoming less comfortable with the political risks surrounding the White House.

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The dollar has hit a one-month low, US stock futures are down and gold rose after the Democrats won control of Congress, increasing expectations of tougher regulation of the AI sector.

US Treasuries rallied as fears around the fiscal outlook eased and investors sought the safety of bonds with the dollar falling.

Democrats regained control of the Senate and also triumphed in the House of Representatives, routing Republicans nationwide with historic victories that will give them powerful new leverage over Donald Trump for the remainder of his presidency.

You can follow the latest on our midterm election blog here:

The dollar fell 0.6% against a basket of major currencies at one stage, and is now down 0.35%. Its decline was most pronounced against the Japanese yen and the Swiss franc, both seen as safe-haven currencies.

Gold prices ​rose 2.4%, supported by the weaker US dollar. Spot gold climbed to $4,022 an ounce.

US stock futures fell sharply, with tech-heavy Nasdaq futures losing more than 2% before paring those losses to 0.25%. S&P 500 futures are down 0.2%.

In bond markets, the two-year Treasury yield fell 3.5 basis points overnight and is now down 1.6bps at 4.598%, while the 10-year yield is 2bps lower at 4.929%. Yields move in opposite direction to prices.

Jim Reid, head of global macro at Deutsche Bank, explains:

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.

Investors are also pricing in a more dovish path for the Federal Reserve 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.

In Asia, Japan’s Nikkei lost 1.4% while Hong Kong’s Hang Seng rose 1.3% and South Korea’s Kospi gained 0.4%.

Stephen Brown, chief North America economist at Capital Economics, says:

The magnitude of the gains for the Democrats in the midterms does not change too much for the near-term policy outlook, given the party still lacks a filibuster-proof majority in the Senate and President Trump has veto power to block legislation.

But the Democrats will now hold Senate seats in many typically red states for the next six years, which increases their chance of being able to enact more sweeping legislative changes if they win the next presidential election. That includes the potential for tax hikes on corporations and high-income individuals as well as regulation that could delay the AI rollout.

The Agenda

• 9am GMT: S&P Global Eurozone services and composite PMIs for October

• 9.30am GMT: UK services and composite PMIs for October

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• 1.15pm GMT: US ADP Employment change for October

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• 3pm GMT: US ISM Services for October