Asia Markets Get Midterm Whiplash as Selloff Gives Way to Relief Rally — 2nd Update

By Sherry Qin, Fabiana Negrin Ochoa and Kimberley Kao

Asia markets did an about-face in the afternoon, with the initial selloff sparked by the U.S. midterm elections giving way to a relief rally as Democrats took control of both the Senate and the House of Representatives.

Investors sold stocks and the dollar, and bought Treasurys as results poured in early Wednesday showing a Democratic wave across the U.S.

A key source of concern was that a Democratic sweep could stymie investments in artificial intelligence, which could hurt tech companies and weaken the greenback.

However, markets pulled off their lows later in the day in what analysts say is likely relief that some clarity has emerged, even if the result isn't what most market participants had expected.

This could be a "combination of dip-buying and investors reassessing the initial knee-jerk reaction to the U.S. election results," said Charu Chanana, chief investment strategist at Saxo. "As U.S. futures recover, some of that relief is spilling into Asian technology stocks."

U.S. equity futures narrowed losses, led by stocks tied to the tech-heavy Nasdaq index. E-mini Nasdaq futures were last down 0.4% after slumping over 2% earlier.

Asian equity benchmarks pulled off a remarkable turnaround, with the hardest-hit indexes completely erasing losses.

It was dramatic turn of events after tech-heavy indexes like Japan's Nikkei Stock Average and South Korea's Kospi spent most of the session deep in the red as the midterm results trickled in.

The U.S. dollar index steadied after touching its lowest level in over a month, firming to 101.50. The 10-year Treasury yield calmed as well, recovering to 4.942% after slipping to its lowest levels since early September at around 4.900%.

"Bonds could benefit from lower growth expectations, but a sustained rally requires confirmation from economic data and inflation trends, not just election headlines," said Saxo's Chanana.

A key source of worry for markets heading into the vote was that a decisive Democrat win could hurt the AI spending momentum that has been an engine of growth for many major Asian economies and markets this year.

That would be bad news for Asia's AI infrastructure players, which have already suffered rounds of selloff recently amid heightened scrutiny on high valuations and the risk that returns won't match investment hopes.

But the bulls seem to have taken control.

Japan's Nikkei Stock Average and Taiwan's Taiex pared back some losses and were last 1.5% and 0.8% lower, respectively. South Korea's Kospi erased earlier losses and last traded 0.3% higher.

Hong Kong's Hang Seng Index rose 1.3% after trading lower earlier, similar to China's Shanghai Composite Index which gained 1.7% after the lunch break.

Cryptocurrencies also pared losses, with bitcoin nearly erasing all losses to last sit down 0.2% at 77,697.45. Ethereum was down 0.3%.

Spot gold and silver jumped 2.0% and 3.3%, respectively.

Oil futures rose, reversing earlier losses. Front-month WTI crude oil futures rose 0.1% to $96.18 a barrel while Brent futures were last 0.1% higher at $103.73 a barrel.

Analysts had warned against reading too much into knee-jerk reactions to midterm outcomes, expecting focus to return to fundamentals after the results gave some clarity.

"The election result may affect the path of fiscal negotiations and generate near-term volatility, but economic growth, corporate earnings, AI investment, inflation, and interest rates should remain more important market drivers," said Mark Haefele, global wealth management chief investment officer at UBS Switzerland.

Market reactions to the midterm results will likely hinge less on which party wins than on how the results compare with investor expectations, said Tiger Brokers chief market strategist James Ooi in a note.

Greater clarity could ease some of the uncertainty weighing on sentiment, Ooi added.

"With the Democrats in control of both the House and the Senate, fiscal policy is likely to largely end up in a stalemate," since President Trump still retains the power to veto any economic reforms introduced by the Democrats, said Amanda Sundström, strategist at Sweden's SEB.

--James Glynn contributed to this report

Write to Sherry Qin at sherry.qin@wsj.com

(END) Dow Jones Newswires

November 04, 2026 02:04 ET (07:04 GMT)