04/11/2026 06:45 AST
Asian stocks fell along with the dollar on Wednesday as Democrats made big early gains in the US midterm elections and looked set to take control of both houses of Congress, which analysts said could lead to gridlock in Washington. Tens of millions of Americans voted in elections seen as a referendum on Donald Trump's presidency, amid anger over soaring fuel prices, tariffs and the Iran war.
Republicans were widely expected to lose the House. The Senate had been seen as finely balanced, but Democrats' chances of taking it rose after they captured North Carolina, a crucial gain in their bid to overturn the Republicans' 53-47 majority. Analysts warned that a Democratic win would deal a heavy blow to Trump's agenda for his final two years and would likely mean little gets done in Washington.
"A narrow blue wave may be largely priced in," said Chris Weston of Pepperstone. "A commanding one could force markets to rethink Trump's remaining policy agenda and the political trajectory into 2028." He said Democratic control of Congress would raise the risk of legislative gridlock, fiscal brinkmanship, debt-ceiling disputes and congressional investigations. However, he added, "the president would retain considerable executive authority, so the implications for individual sectors are far from straightforward".
Prediction market Polymarket put Democrats' chances at 100 percent for the House and 99 percent for the Senate. The prospect of a standstill in Congress, which would restrict spending, weighed on the dollar and Treasury yields. "Typically, when we get a divided government, it has been historically pretty good for Treasuries," said Brij Khurana of Wellington Management.
Tokyo lost more than 3 percent as the yen strengthened against the dollar, hurting exporters. Hong Kong, Shanghai, Sydney, Seoul, Singapore and Taipei also fell. Tech firms were under pressure as investors continued to worry about the AI investment boom and when, or whether, the firms pouring billions into it will see returns. In Tokyo, chipmaker Kioxia plunged more than 13 percent, while Advantest and SoftBank lost more than 8 percent. In Seoul, SK hynix fell as much as 3 percent and Samsung almost 2 percent.
Oil extended Tuesday's losses as investors watched the Middle East. Trump confirmed US strikes on Iran but played down speculation that he was preparing to resume bombing after the election. "We seem to be getting everything we want," he told the Financial Times on Tuesday. "I'm ready, we're ready. We're locked and loaded if we need to go, but there may be no reason for it." Iranian President Masoud Pezeshkian said his government was still trying to resolve the crisis "through dialogue", but Iran's chief negotiator Mohammad Bagher Ghalibaf said the country was "ready for battle with its finger on the trigger".
Key figures at around 0230 GMT
Tokyo - Nikkei 225: DOWN 3.6 percent at 60,835.36 (break)
Hong Kong - Hang Seng Index: DOWN 0.4 percent at 23,428.32
Shanghai - Composite: DOWN 0.1 percent at 3,606.18
Euro/dollar: UP at $1.1249 from $1.1191 on Tuesday
Pound/dollar: UP at $1.3465 from $1.3413
Dollar/yen: DOWN at 158.06 yen from 158.75 yen
Euro/pound: DOWN at 83.35 pence from 83.43 pence
West Texas Intermediate: DOWN 0.5 percent at $96.65 per barrel
Brent North Sea crude: DOWN 0.2 percent at $103.41 per barrel
New York - Dow: DOWN 0.4 percent at 51,786.72 (close)
London - FTSE 100: DOWN 1.1 percent at 10,638.43 (close)
AFP
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