AI stocks, oil fall after US election

LONDON: Chip stocks and the US dollar fell on Thursday, while broader equity markets and gold advanced after a sweeping Democratic victory in US midterm elections raised hopes of an end to the US-Iran war.
Brent crude futures plunged nearly 9% overnight, falling below $100 a barrel for the first time in two months. Prices have dropped around 20% so far this week, putting Brent on course for its biggest weekly loss since April 2020.
Falling energy prices helped drive a bond rally, pushing US yields lower and keeping the dollar near one-month lows against the euro, while supporting stocks.
The MSCI All-World index rose 0.1%, following its biggest one-day gain since late July on Wednesday. In Europe, the STOXX 600 gained a further 0.7%, bringing it close to its August record high.
Deutsche Bank strategist Jim Reid said the election result was broadly in line with investor expectations, although the scale of the Democratic victory was greater than anticipated.
He said the market rally followed the traditional midterm election pattern, noting that the S&P 500 had been higher one year after all 20 US midterm elections since the Second World War.
On Wall Street, the S&P 500 closed 1.6% higher as investors welcomed the clear election outcome. However, technology stocks remained under pressure amid concerns over increased scrutiny of investment in AI infrastructure.
The Philadelphia Semiconductor Index fell 3.1%, having lost a quarter of its value in a month. Nasdaq 100 futures fell 0.7%, while S&P 500 futures slipped 0.1%.
Democratic candidates who campaigned partly on moratoriums on data-centre construction secured victories in Texas and Georgia.
In Europe, banking and pharmaceutical shares advanced, while semiconductor-related stocks, including ASML, Soitec and Infineon, fell between 1.2% and 4%.
Asian markets, which are heavily exposed to AI-related stocks, also suffered losses. South Korea's semiconductor-heavy KOSPI fell nearly 6%, approaching seven-month lows.
Masahiko Loo, chief fixed-income strategist at State Street Investment Management, said Democratic control raised the prospect of tougher scrutiny of data centres, electricity demand and consumer costs, although 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 shares also advanced, with Denmark's Orsted and Vestas rising 2.6% and 1%, respectively.
Crude oil was last up 0.8% at $95 a barrel, after losing nearly 10% in two days. Investors bet that Trump, facing a Democratic Congress and pressure from high energy prices caused by the Middle East conflict, would be less likely to escalate the war with Iran.
Trump acknowledged on Wednesday that the war had played a role in the Republicans' election defeat. Vice-President JD Vance was more direct in a post on X, saying: “The reason we lost is the war.”
Gold traded above $4,100 an ounce, having risen 5% in two days, its biggest two-day gain since early April.
Bond prices also advanced, pushing the yield on the benchmark 10-year US Treasury note down two basis points to 4.87%.
The dollar weakened broadly, with investors focusing on the Bank of England's monetary policy announcement later on Thursday.
The central bank was expected to raise interest rates to counter inflationary pressures from higher energy costs, although it could push back against market expectations of several further increases next year. — Reuters