International markets have been shaken by the Democrats’ sweeping victory in the US midterm elections, as investors reassess their positions in light of the new political landscape in Washington. Technology stocks are plunging, the dollar is weakening and US government bonds are gaining ground, while the prospect of tighter scrutiny of President Donald Trump’s policies is sending shockwaves from Asian stock exchanges to cryptocurrency markets.

The Democrats’ regaining control of both chambers of Congress is prompting markets to reassess investment strategies that had been built around Trump’s political agenda, particularly its emphasis on deregulation and the rapid expansion of artificial intelligence infrastructure.

Although the US President retains the power to block legislative initiatives through his veto authority, the new Democratic majority is expected to intensify investigations and congressional oversight, particularly regarding government spending and the administration’s relationships with major corporations.

The global investment boom surrounding artificial intelligence (AI) is coming under renewed pressure, with a sharp fall in Nasdaq 100 futures pointing to another difficult trading session for US technology stocks.

In South Korea, the Kospi index fell by as much as 4%, with shares in Samsung Electronics and SK Hynix recording losses of more than 5% before recovering some of their declines.

In Japan, the technology-heavy Nikkei 225 plunged by almost 5%, while in Taiwan the benchmark stock index fell by as much as 3.4%.

Investors fear that the Democrats’ gains could lead to tighter oversight of the technology sector, as well as delays in the construction of new data centres in the United States.

The expansion of this infrastructure was an electoral issue for candidates from both parties, intensifying existing concerns over the enormous scale of AI investment and the returns it can deliver.

Renewable energy companies emerge as winners

In contrast to the technology sector, renewable energy companies are emerging as beneficiaries of the electoral shift.

Investors believe that the Democrats’ victory could slow down or even reverse some of the Trump administration’s measures restricting support for clean energy projects.

Such a development could benefit Asian manufacturers of solar panels, batteries and electricity grid equipment with a significant presence in the US market.

In South Korea, Hanwha Solutions gained as much as 17%, while HD Hyundai Energy Solutions and OCI Holdings each rose by at least 8%.

Strong gains were also recorded by US solar energy companies in trading on the Blue Ocean platform.

Enphase Energy and SolarEdge Technologies climbed by as much as 12%, while First Solar gained 11% and Sunrun rose by 8.7%.

Dollar records its biggest monthly decline

In foreign exchange markets, the dollar fell against all ten major G10 currencies, as investors questioned whether the US economy would continue to outperform other major economies.

The Bloomberg Dollar Index dropped by as much as 0.4%, recording its largest daily decline in a month.

By contrast, the Swiss franc and Japanese yen strengthened as investors sought safer assets.

US government bonds also posted strong gains, with yields falling across the entire curve.

The yield on five-year US Treasury bonds fell by as much as nine basis points to 4.68%, while the 10-year yield declined by seven basis points to 4.89%, before recovering some of its losses.

US Treasuries rally after Democrats’ victory

US government bonds rallied strongly after the Democrats secured control of both chambers of Congress, as investors believe the new political balance will limit President Donald Trump’s ability to introduce further tax cuts and increase government spending.

Yields fell across the entire curve, with the five-year Treasury yield declining by as much as nine basis points to 4.67%, before recovering some of its losses, while the 10-year yield fell by two basis points to 4.94%. Meanwhile, the Bloomberg Dollar Index lost 0.3%.

With US national debt approaching $40 trillion, markets believe the prospect of political gridlock in Washington could constrain the expansion of budget deficits and the need for additional borrowing.

“A divided government means less fiscal spending than we have seen in recent years. Historically, that is usually positive for US Treasuries,” said Bridge Kurana, portfolio manager at Wellington Management.

Investors are also turning their attention to announcements by the US Treasury Department on Wednesday regarding its quarterly bond issuance programme.

Bitcoin falls below $76,000 after Trump’s defeat

The wave of risk aversion also swept through cryptocurrency markets, as the Democrats’ victory raised doubts over the prospects for legislative initiatives backed by the industry.

Donald Trump had emerged as a staunch supporter of digital assets, pledging to turn the United States into the “crypto capital of the world”, establish a strategic Bitcoin reserve and ease regulatory pressure on companies operating in the sector.

This policy had fuelled expectations of a more favourable environment for the industry’s growth.

However, the new composition of Congress could make it more difficult to advance the relevant legislative changes.

Bitcoin fell by as much as 2.8%, dropping below $76,000 as election results began to come in.

Ether and Solana also traded lower.

Oil: Brent near $103 as markets watch US-Iran talks

Oil continued its downward trajectory as investors assessed renewed diplomatic efforts to de-escalate the conflict between the United States and Iran.

Brent crude was trading near $103 a barrel, offering some relief to Asian economies dependent on energy imports after weeks of particularly high prices.

Renewed diplomatic activity between Washington and Tehran contributed to the decline in prices. However, the possibility of a resumption of US military strikes following the midterm elections continues to fuel uncertainty.

A Congress controlled by Democrats could increase political pressure on the Trump administration over the war, although it would not directly determine US foreign or military policy decisions.

This leaves oil as one of the biggest uncertainties for Asian markets, particularly for countries heavily dependent on energy imports, such as India.

Gold climbs above $3,960

Gold rose by as much as 0.9%, climbing above $3,960 an ounce and recovering the modest losses recorded in the previous trading session.

Investors are seeking to assess whether the Democrats’ strong performance will limit Trump’s ability to advance his fiscal agenda and further increase government spending.

Concerns over widening budget deficits and the state of US public finances have been among the main factors behind the precious metal’s rally this year.

The prospect of curbing additional spending therefore creates a new set of conditions for the gold market, at a time when political uncertainty is strengthening demand for safe-haven assets.