US Midterm Election 'Blue Sweep' Rattles Markets: Asian Equities and US Stock Futures Plunge

US stock futures and Asian equities experienced a significant downturn, accompanied by a fall in the dollar, as early results from the US midterm elections indicated a potential Democratic sweep. This outcome poses a threat to President Donald Trump’s agenda. Futures for the benchmark S&P 500 index dropped 1.06 per cent by 6:30 AM, erasing an earlier 0.5 per cent gain as election results began to be released on Wednesday. The tech-heavy Nasdaq 100 futures saw a decline of 1.9 per cent, while Dow Jones index futures fell by 0.7 per cent. The US dollar weakened against a basket of its G10 peers. While stock index futures declined, US Treasuries saw a benefit, with the yield on the benchmark 10-year Treasury note decreasing by seven basis points to 4.89 per cent, according to Bloomberg data. The slide in stock index futures is attributed to investor concerns that a Democratic-controlled House and potential control of the Senate could lead to stricter regulations and increased scrutiny of technology-focused sectors, including artificial intelligence companies. Conversely, Treasuries are expected to benefit as political negotiations in Washington are likely to limit government spending, thereby easing borrowing concerns. Andrew Ticehurst, a senior rates strategist at Nomura Holdings, was quoted by Bloomberg stating, “Early headlines and prediction markets are suggesting a rising probability of a blue wave.” He added, “That scenario is generally regarded as being negative for the dollar and positive for US Treasuries. Markets are reacting consistently with that in early Asia trading.” A 'blue wave' in US politics signifies a substantial electoral victory for the Democratic Party, whose traditional color is blue.

In Asia, equity benchmarks followed suit, reversing earlier gains and taking their cue from the downturn in US stock futures. The MSCI's broadest index of Asia-Pacific shares outside Japan fell by 0.5 per cent. South Korea's Kopsi index plummeted 3.6 per cent, wiping out its earlier gains of more than 3 per cent. Japan's Nikkei index dropped 3.5 per cent, and Hong Kong's Hang Seng index slipped 0.22 per cent. China’s Shanghai SE index also retreated by 0.21 per cent. Stocks in India were also anticipated to open lower. Charu Chanana, chief investment strategist at Saxo in Singapore, commented to Reuters,