Premarket: AI stocks, oil fall as investors bet on change after U.S. election ‘blue wave’

Chip stocks and the dollar fell on Thursday, while oil steadied around recent lows and broader share prices, gold and other assets rose after a sweeping Democratic victory in U.S. midterm elections raised hopes for an end to the ⁠U.S.-Iran war.

Brent ​crude futures dived nearly 9 per cent overnight, falling below US$100 a barrel for the first time in two months. The price has dropped by about 20 per cent so far this week, heading for its largest weekly loss since April 2020.

Tumbling energy prices encouraged a rally in bonds, which lowered U.S. yields, kept the dollar around one-month lows against the euro, and helped stocks.

The MSCI All-World index was up ​0.1 per cent, having posted its biggest one-day gain since late July on Wednesday. In Europe, the ‌STOXX 600 rallied another 0.7 per cent, bringing the index to within a whisker of August’s record high.

“When it comes to the headline result, it’s not too different from investor expectations beforehand, even if the scale of the Democratic victory was bigger than expected,” Deutsche Bank strategist Jim Reid said.

“In many respects, the overall rally fits into the classic midterm pattern we’ve previously highlighted. After all, in 20 out of 20 midterm elections since World War Two, ‌the S&P 500 ​has been higher one year later,” he ‌said.

O Wall Street, the benchmark indexes rallied as investors took heart from the clear outcome, with the S&P 500 closing 1.6 per cent higher, ​although tech stocks continued to struggle as investors fear greater scrutiny over AI infrastructure ⁠build-out.

The Philadelphia semiconductor index fell 3.1 per cent, having lost a quarter of its value in a month.

Democratic data-center opponents ⁠who campaigned, in part, on moratoriums on data center construction won victories in Texas and Georgia.

Futures on the Nasdaq 100 were down 0.7 per cent, while those on the S&P itself ​fell just 0.1 per cent.

Tech stocks in Europe make up a smaller part of the broader market, which is more heavily dominated by banking shares and drugmakers. Those sectors jumped on Thursday. Within the regional tech sector, semiconductor-exposed stocks such as ASML , Soitec and Infineon fell between 1.2 per cent and 4 per cent.

Asian markets, which are heavily exposed to AI-related stocks, suffered losses, with South Korea’s chipmaker-heavy KOSPI down nearly 6 per cent near seven-month lows.

Masahiko Loo, chief fixed income strategist ⁠at State Street Investment Management, said Democratic control raises the prospect of tougher scrutiny around data centers, power demand and consumer costs, but does not mean a free hand as President Donald Trump retains veto power.

“The blue wave therefore raises the political risk premium around US AI without necessarily derailing the broader AI capex cycle,” he said.

Renewable energy stocks, which have been targeted by the Trump administration over the past almost-two years, rallied, with Denmark’s Orsted and Vestas up 2.6 per cent and 1 per cent, respectively.

Crude ⁠oil, meanwhile, was last up 0.8 per cent on the day, at US$95 a barrel, having ​lost nearly 10 per cent in two days, as traders chose to bet that Trump, facing a Democratic Congress and hurt by high energy prices caused ⁠by the Mideast conflict, would be less likely to escalate the war with Iran.

Trump acknowledged on Wednesday that the war played a role in Republicans’ defeat and his vice president, ‌JD Vance, was even more blunt on X: “The reason we lost is the war.”

With the dollar and oil under pressure, gold traded above US$4,100 an ​ounce, having risen 5 per cent in two days, its largest two-day jump since early April.

Bond prices gained as well, pushing yields on the benchmark 10-year U.S. note down 2 basis points to 4.87 per cent.

In currencies, the dollar was broadly weaker, with investor focus on the Bank of England’s policy announcement later on Thursday.

The central bank is expected to raise rates to contend with inflation ​pressure from soaring energy costs, although it may push back against investor bets that several more increases will follow next year.

Reuters