Democrats take Congress as futures rebound and oil slides

Democrats took control of both chambers of Congress in Tuesday's midterm elections, according to the Associated Press tally carried on The Wall Street Journal's live results page on Wednesday morning: Senate Democrats 54, Republicans 44, a gain of 7 for Democrats, with 51 seats needed for a majority; House Democrats 228, Republicans 139, a gain of 25 for Democrats, with 218 seats needed for a majority. The Economist described the result as a landslide for Democrats and a rebuke to President Donald Trump, with Republicans facing a changed final two years of his term.

Two cautions still apply to the totals. First, they are media tallies from called races, not final certified results, and a small number of races remained uncalled on Wednesday morning, including Alaska, where a ranked-choice count is scheduled for November 18, and Mississippi. Second, the seat counts above describe the incoming chambers, including seats not contested this year, not only the seats won on Tuesday. The Journal's voter analysis added an economic explanation for the scale of the result: about three quarters of voters described the economy as not so good or poor, and those voters overwhelmingly backed Democratic candidates.

For markets, the practical consequence is gridlock, and gridlock cuts both ways. It limits new spending, tax, and regulatory legislation, which is the argument behind the morning rebound in broad futures. It also raises oversight and investigation risk for the administration's policies, including on artificial intelligence and on the Iran campaign, which is the argument behind the overnight fall in chip shares and the slide in oil. Neither argument is settled by the count alone, and both will be tested by what Congress actually does when it convenes in January.

Asia's Wednesday closes show the overnight chip scare in its purest form, then a partial recovery. Japan's Nikkei 225, returning from the Culture Day holiday, fell 893.23 points, or 1.42 percent, to 62,188.63, after touching an intraday low of 60,030.10, while the broader Topix fell 0.89 percent to 3,895.38. Taiwan's Taiex fell 0.83 percent to 42,948.91, its fifth straight decline. South Korea's KOSPI swung from an intraday low of 5,421.72 to a close of 5,683.80, up 0.62 percent, and Australia's ASX 200 fell 0.59 percent to 8,834.50.

China moved the other way, and by a wide margin. The Shanghai Composite rose 2.16 percent to 3,686.17, the Shenzhen Component gained 4.22 percent to 11,335.69, and the ChiNext index jumped 6.40 percent to 2,544.73, while Hong Kong's Hang Seng rose 1.67 percent to 23,919.50, its fourth straight gain. India's Sensex added 0.43 percent to 77,246.77. Reporting on the session attributed Seoul's recovery to battery and pharmaceutical shares rising on hopes for policy support from a Democratic Congress, a reminder that the same election result can read as a threat to one sector and support for another.

Europe opened higher and gained as the morning went on. Early trading put the STOXX 600 up about 0.5 percent, the DAX up about 0.5 percent, the CAC 40 up about 0.5 percent, and the FTSE 100 up about 0.4 percent, helped by bank and clean energy shares. By midday in London, the FTSE 100 was up 110.52 points, or 1.0 percent, at 10,748.95, with banking shares rallying, and later morning snapshots put the DAX, CAC 40, and FTSE 100 up roughly 1 to 1.5 percent. Novo Nordisk's earnings, covered below, added a company-level lift in Copenhagen. Tuesday's European closes, for context, were the FTSE 100 at 10,638.43, down 1.14 percent, the DAX at 25,864.62, down 0.45 percent, and the CAC 40 at 8,020.31, down 0.34 percent.

Eurostat's flash estimate, released Wednesday, put eurozone annual inflation at 4.0 percent in October, up from 3.8 percent in September, the highest since September 2023 and twice the European Central Bank's 2 percent target. Energy prices were 20.8 percent higher than a year earlier, up from 18.9 percent in September, while core inflation, which strips out energy and food, held at 2.5 percent. The split matters for the ECB's December decision: headline inflation argues for another hike from the current 2.50 percent deposit rate, while steady core inflation argues that the energy shock has not yet spread widely into wages and services, where inflation edged up to 3.3 percent from 3.2 percent.

Thursday brings the week's main central bank decision. The Bank of England is widely expected to raise Bank Rate to 4.00 percent from 3.75 percent on Thursday, its first hike since 2023, with the decision, minutes, vote split, and Monetary Policy Report due at noon London time and Governor Andrew Bailey's press conference at 12:30 p.m. London time. The Federal Reserve held at 3.75 to 4.00 percent on October 28, and the Bank of Canada hiked to 2.50 percent the same day; their next decisions are both due December 9. The United States 10 year yield traded near 4.93 percent on Wednesday morning, little changed from Tuesday's 4.97 percent close, while the dollar index fell about 0.5 percent in the morning, the euro rose to about 1.1249 dollars, and sterling traded near 1.3480 dollars at midday in London, up from 1.3416 at Tuesday's London close.

Today's United States data will test the labour leg of the rates story before Friday's official jobs report. ADP private payrolls are due at 8:15 a.m. ET, with forecasts near 65,000 to 70,000, down from 90,000 previously, and ISM services is due at 10:00 a.m. ET, with 54.8 expected against 54.9 previously. The Treasury's quarterly refunding details and the September trade report are both due at 8:30 a.m. ET. Canada's employment report is due Friday, with a Reuters poll pointing to about 13,600 jobs added and unemployment holding at 6.5 percent.

Oil fell through Wednesday morning on the same political logic that lifted equities: a Democratic Congress raises doubts about funding and support for an expanded Iran campaign, which lowers the odds of a sustained new supply shock. Front-month Brent crude was down 0.7 percent to $102.87 a barrel in a volatile session, while West Texas Intermediate slipped 0.2 percent to $94.97 in the Morningstar and Dow Jones update timed 5:21 a.m. ET. Earlier, at 5:10 a.m. ET, Brent had slipped 1.26 percent to $102.20 and WTI had declined 0.68 percent to about $95.44. By the later morning ticker, WTI was quoted near $93.49, down about 2.7 percent, a sign that the slide deepened as the morning went on rather than reversing.

Tuesday's settlements are the base for those moves: Brent settled at $103.60, down 1.12 percent, its lowest settlement since October 7, while WTI edged up 0.36 percent to $96.81, and natural gas rose 1.37 percent to $2.8950 per million British thermal units. The Energy Information Administration's weekly inventory report is due at 10:30 a.m. ET on Wednesday, and it is the next scheduled oil input after the political headlines. The Wall Street Journal also reported attempts to disrupt the restored flow of oil out of the Persian Gulf, a reminder that the Strait of Hormuz risk has eased, not ended, and that any confirmed escalation report would reverse Wednesday's slide quickly.

Metals moved the opposite way, and by more than oil moved. Gold rose to about $4,055.60 on the morning ticker, up 2.92 percent from Tuesday's $3,933.80 settlement, while silver traded near $52.04, up about 4.17 percent, and copper traded near $6.45 a pound, up about 1.75 percent from Tuesday's $6.3785 settlement. The Canadian dollar firmed with the metals: the United States dollar traded near 1.3958 Canadian dollars in the morning, down about 0.34 percent, putting the loonie near 71.7 cents in United States terms, up from 71.39 cents at Tuesday's Toronto close. December futures on the S&P/TSX index were up 1.3 percent at 6:04 a.m. ET, with gold miners supported and energy shares facing the oil headwind.

AMD is Wednesday's clearest earnings-to-price link. AMD shares jumped 6.2 percent in premarket trading on Wednesday, with Nvidia up 1.2 percent, Broadcom up about 1.0 percent, and Marvell up 0.4 percent, after AMD reported third-quarter revenue of $13.38 billion, up 45 percent, adjusted earnings of $2.09 a share against about $1.95 expected, and data center revenue of $8.5 billion, up 97 percent, with fourth-quarter revenue guided to about $17 billion. Arista Networks reported revenue up 58.5 percent to $3.66 billion, its fastest growth since its listing, with shares up about 9.5 percent after hours. Together, the two reports argue that artificial intelligence hardware demand, at least in data centers, has not cooled, even as Asian chip shares fell overnight on the same spending doubts.

Suncor gave Canada its own earnings anchor. Suncor reported third-quarter net earnings of C$3.814 billion, or C$3.27 a share, up from C$1.619 billion, or C$1.34 a share, a year earlier, with adjusted operating earnings of C$4.631 billion, or C$3.97 a share, against an analysts' average estimate of C$3.28 a share, and record quarterly adjusted funds from operations of C$6.705 billion. Upstream production averaged 852,500 barrels a day, down about 2 percent from a year earlier, while refined product sales set a third-quarter record of 676,900 barrels a day, and the board raised the quarterly dividend 10 percent to C$0.66 a share, payable December 24. The company holds its analyst webcast on Wednesday.

Novo Nordisk added a European earnings beat with a complication inside it. Novo reported third-quarter sales of DKK 79.2 billion, up 4 percent at constant exchange rates, adjusted operating profit of DKK 31.72 billion, up 27 percent at constant exchange rates, and obesity sales up 22 percent to DKK 26.2 billion, and raised its full-year outlook to adjusted sales and adjusted operating profit growth of between a 2 percent decline and a 2 percent increase at constant exchange rates. Reported operating profit fell 9 percent at constant exchange rates to DKK 23.01 billion, after DKK 8.7 billion of non-cash impairment charges, and net profit fell 16 percent in kroner to DKK 16.74 billion. Shares rose more than 5 percent in premarket trading to about $42. Before the open, Novo, McDonald's, and Uber also reported, and after the close Qualcomm, Arm, DoorDash, Mercado Libre, and Expedia are due, a slate that will test whether the chip and consumer stories hold beyond the morning's political rebound.

Compare Wednesday morning to the last four sessions and the shape is a rotation with a political trigger, not a broad reversal. Friday, October 30, was a tech-led fall: the Nasdaq down 2.86 percent, the S&P 500 down 1.82 percent, and the Dow down 1.09 percent. Monday split the tape the other way, with the Dow up and technology down. Tuesday split it again, with the Nasdaq up 0.83 percent and the S&P 500 up 0.36 percent, but the Dow down 0.38 percent and Toronto down 0.75 percent. Wednesday morning, so far, reverses Tuesday's split in part: broad futures rise together, led by the Dow, while gold rises faster than equities, a combination that fits a political and geopolitical repricing better than a pure risk-on day.

The chain linking the drivers runs in order. First, politics: the midterm sweep changes what legislation can pass and raises oversight risk, which first hurt chip shares overnight, then lifted broad futures as gridlock and a smaller Iran campaign were priced in. Second, oil: Brent's fall from its Friday intraday high of $117.64, through Monday's plunge of more than 7 percent, to Tuesday's $103.60 settlement and Wednesday's slide toward $102, eases the inflation fear that pushed eurozone inflation to 4.0 percent in October, but the energy component of that inflation print, up 20.8 percent on the year, shows the relief has not yet reached consumer prices. Third, earnings: AMD and Arista gave the American chip trade a fundamental anchor that Asian chip shares did not have overnight, so the same sector fell in Tokyo and Taipei and rose in New York premarket trading on the same day.

What would change the reading is the regular session itself. If the futures rebound holds through the ADP and ISM services releases, and Qualcomm and Arm confirm the chip demand story after the close, Wednesday becomes the day the political shock was absorbed. If the labour data runs hot, the yield leg tightens again, and if the vote count or the Strait of Hormuz produces a fresh shock, the morning's gold bid becomes the tell that the market never fully believed the rebound. The Economist's Wednesday items point the same way: its Buttonwood column warns that China's artificial intelligence stock struggles are a warning for the wider theme, while its China markets item calls Chinese stocks the great global exception, a split that matches Wednesday's Asia closes exactly.