US Market Open: Democrats are projected to have flipped both the House and Senate from the Republicans; initial US equity pressure has since reversed, with NQ +1.1%

Democrats are projected to have flipped both the House and Senate from the Republicans.
US President Trump said he will accept the election result and is prepared to work with Democrats, while stating that veto power is one of the strongest powers he has.
An initial Dem sweep trade was seen overnight, which spurred pressure in the USD, yields and US equity futures.
However, US equity futures have since reversed earlier losses with NQ and ES now stronger by c. 1.1% and 1.2%, respectively.
USD remains pressured, whilst G10s broadly strengthen.
Crude benchmarks slipped throughout the European morning, but have clambered off worst levels after hawkish rhetoric from Iran’s leader.
Looking ahead, highlights include Global Services/Composite PMI Final (Oct), US ADP Employment Change (Oct), Trade Balance (Sep), ISM Services PMI (Oct), Atlanta Fed GDP (Q4), US Treasury Quarterly Refunding Announcement, NBP Policy Announcement, BCB Policy Announcement, BoJ Minutes, South African Municipal Elections. Speakers include ECB's Lane. Earnings from Qualcomm.

SNAPSHOT

LOOKING AHEAD

Looking ahead, highlights include Global Services/Composite PMI Final (Oct), US ADP Employment Change (Oct), Trade Balance (Sep), ISM Services PMI (Oct), Atlanta Fed GDP (Q4), US Treasury Quarterly Refunding Announcement, NBP Policy Announcement, BCB Policy Announcement, BoJ Minutes, South African Municipal Elections. Speakers include ECB's Lane. Earnings from Qualcomm.
Click for the Newsquawk Week Ahead.

US MIDTERM ELECTIONS

SUMMARY/PRICE ACTION

In short, Democrats are projected to have flipped both the House and Senate from the Republicans. The trade began as expected, with the USD softer (overnight, DXY -0.6%, G10s firmer across the board, CHF and JPY led) and USTs bid throughout this, weighing on the US 10yr yield by c. 5bps.
Big tech/AI names were initially all hit on this, with those supporting the trade (e.g. energy, components, etc) also suffering; NVDA, MSFT, META, GOOG, etc. Banks (JPM, GS) dented by the regulation narrative, which weighed on crypto-sensitive stocks too, COIN. On the flip side, the Dem. trade is supporting healthcare names (UNH, CNC, HCA) and some retail stocks (WMT, DG).
However, some of the local (PUC/PSC) results were then called Republican in key areas; the most pertinent thus far being Louisiana District 5, which has three Amazon facilities planned, and potentially helped spur the easing of pressure seen in such names in the early hours. Though, the PSC results for Georgia potentially offset this given the data centre exposure in the region.
On that, an unwind/fade of the Dem. trade is also evident on a macro level. Initially taking some influence from the upside seen in the energy space (likely as attention turns back to Iran), or as Trump expressed an openness to working with the Dems. This has seen an unwind in the fixed income space, with USTs higher by around 5 ticks vs earlier gains of c. 15 ticks, and Bunds in the red by a handful of ticks. In FX, G10s are broadly gaining against the USD with outperformance in the Kiwi. Moreover, the ES and NQ have reversed initial losses to now trade firmer by c. 0.9%. For energy, that has since reverted well into the red, potentially on the relatively measured general language from Trump overnight post-midterms, and on the narrative of a Dem. House/Senate using the influence/powers they have to work to end the conflict.

MAIN POLITICAL UPDATES

Democrats flipped key Senate races (Ohio, Texas, South Carolina, Kansas) and are eyeing a potential 54-seat plus Senate majority, meeting the high end of Democratic projections going into the elections. The Kansas and Texas wins are the most historic, with Democrats last winning a Senate race in Kansas in 1932 and in Texas in 1988, while an RCP analyst wrote regarding the Republicans' performance that it was "Easily the worst election for a party since 1974."
For the overnight timeline, just over five hours after the first polls closed, DDHQ gave Democrats a 99% chance of winning the House and a 100% chance of winning the Senate, while the latest DDHQ live seat count showed Democrats at 241 vs Republicans at 149 in the House, while Democrats were at 54 vs Republicans at 44 in the Senate. Democrats also performed well in the gubernatorial races, winning Texas, Ohio and Georgia, all flips.
US President Trump said he is prepared to work with Democrats and will accept the election result, according to the NYT. In a Truth Social post, he stated that he would have won in a landslide if he were on the ballot, while he thought some candidates would have done better. On Fox, he outlined that veto power is one of the strongest powers he has and that part of the result was Iran, adding that the US was probably not ready for the short-term gasoline consequences of the Iran conflict. Furthermore, he said he could work with the Democrats on many things, such as immigration and will not make cabinet changes.
Regarding Iran, the President said if they behave then the US can sign something up, and can finish the job very easily.
Oracle (ORCL) cancels USD 7bln Tencent (700 HK) AI deal under Trump pressure, according to FT.

NEXT FOCUS POINTS

Iran is, of course, the main risk in the near term, with the focus points around that familiar and centred on the upcoming weekend.
Then, any further ORCL-type developments from a sector/stock-specific level.
For the results, the next major one is Alaska on the Senate. Mississippi is also yet to be called.

EUROPEAN TRADE

EQUITIES

European bourses (Stoxx 600 +0.9%) start Wednesday’s session entirely in the green, with focus being on the US midterms overnight.
Focus has been on Novo Nordisk (+4%), after it lifted its sales and profit guidance for the FY to growth of as much as 2%, from a prior forecast of a decline of as much as 6%, helped by optimism over its Wegovy pill. For its new pill, sales beat analyst estimates, with Novo highlighting that it should be available in over 20 markets in 2027.
Turning to US equity futures, the ES was down as much as 1.4% overnight but has since reversed, with all futures benchmarks in the green heading into pre-market trade. Very brief pressure was seen at the start of pre-market, but that has since reversed.
Post mid-terms, key spaces to watch are: Health Care, Energy and Defence. For Health Care, less cuts to Medicaid are now expected with a possible restoration of ACA subsidies. As a result, UNH gained early doors, but has since reversed to post pre-market losses of c. 0.7%; HCA (+2.4%) holds on to earlier gains. Turning to Energy and Utilities, there is particular focus on Texas, as the Democratic win puts ERCOT power deregulation at risk. FSLR is higher by 9.2% pre-market, with European peers also firmer (Orsted +7%, Vestas +5%). Finally, the prospect of trimmed funding for defence will provide a headwind for US defence names, with LMT lower by 2.9% pre-market, while BAE Systems is slumping over 3.6% given its high exposure to the US.

FX

Snapshot: USD under pressure against all G10 peers. The NZD holds towards the top of the pile, whilst the JPY is only mildly stronger against the Dollar.
Overnight, USD was pressured as initial projections suggested a Democratic sweep, and more so than what market participants had expected, with several states surprisingly swinging from R to D. Heading into the midterm elections, it was widely viewed that a D majority in both House and Senate would be USD-negative, given the lower growth implications, lower yields and added friction in passing policy. This price action played out largely overnight, with significant selling pressure in the Dollar index, taking it to a session trough of 101.24 (vs 101.73 peak).
Whilst the USD weakness has continued into the European morning, G10 peers flipped from displaying a risk-off tone, to a risk-on one. The Kiwi outperforms vs peers, joined closely by the Aussie. A shift which comes after two main points: 1) Republicans winning the Louisiana race, and 2) President Trump sounding fairly conciliatory regarding the D projected victory, indicating openness to work with the opposition. This has perhaps abated some woes surrounding political friction, spurring some risk-on trade. Nonetheless, the USD remains pressured as yields remain lower on the session.
JPY has not been able to benefit quite as much as some of its other G10 peers. USD/JPY currently holds within a 157.38 to 158.74 range, sitting close to intervention territory. As such, markets were met with jawboning via Japanese Chief Cabinet Secretary Kihara, who noted that authorities will closely monitor market movements with a high sense of urgency. Some market participants may also be thinking about the potential loosening of US-Japan relations following the Dems' strong performance. This perhaps will be a longer-term theme, but remains a risk heading into 2027 and 2028, where the presidential elections will come into view.

FIXED INCOME

Fixed income was initially bullish as the US midterms pointed to a Democratic sweep, with both the House and Senate projected to have shifted blue. However, this then unwound to a degree, though USTs are back in the green once again.
Specifically, the early-APAC projections showing Democrats flipping multiple major Senate races, including Texas, helped to lift USTs to a 106-30 peak, with gains of 15 ticks or so at best. Then, as Trump expressed an openness to working with the Democrats, some key local (PUC/PSC) results went in favour of Republicans and, more generally, on a broader fading of the initial Dem. reaction, with many commentators describing it as overdone, a pullback was seen, to a 106-18 overnight low but clear of the 106-12+ late-US base. As it stands, USTs are off that base and post gains of a handful of ticks, with geopolitics and the QRA in focus.
As above, market attention is already turning back to the Middle East, given the potential for kinetic action by the US against Iran into/during the weekend. On the docket, we have a handful of data prints and the QRA, which may see an update to the long end and/or 20yr specifically.
Amidst this, EGBs have been directionally in-fitting until the European morning at least. Bunds hit a 122.42 overnight low alongside USTs, before then rebounding modestly to gains of c. 10 ticks. However, while USTs remain bid, Bunds have slipped into the red once more and to a 122.29 session base. The morning’s regional weather data turned colder once again, and the traditional haven narrative may be factoring in, as European equity futures (and since cash bourses) climbed.
Gilts digested most of this at the open. Started the day lower by a handful of ticks, before lifting to an 86.13 peak with gains of about 20 ticks. Since, in line with USTs for the most part. UK specifics light.
Germany sells EUR 1.66bln vs exp. EUR 2bln 2.60% 2041 and 1.25% 2048 Bund.
Meta (META) begins the sale of its EUR-denominated bond offering (six-parter).
Australia sold AUD 400mln in 5% June 2036 bonds, avg. yield 5.075%, b/c 4.19.
HSBC (5 HK) has issued USD 1.75bln of 5.819% fixed/floating rate senior unsecured notes due 2032 and USD 2.5bln of 6.262% fixed/floating rate senior unsecured notes due 2037.

COMMODITIES

Crude benchmarks were initially firmer in early morning trade, but gradually dipped as the session progressed. Focus overnight was on comments via US President Trump, who told the FT there is no immediate plan to strike Iran, alongside the initial Democratic sweep trade, before recovering as that trade faded. WTI Dec'26 trades within a USD 94.60-97.15/bbl range (vs yesterday's USD 93.59-98.82/bbl range), while Brent Jan'27 moves within a USD 101.55-104.96/bbl range (vs yesterday's USD 100.80-107.24/bbl range).
Most recently, crude benchmarks have bounced off worst levels after the Iranian leader warned of a broader response if the US repeats its aggression.
Focus remains on the Strait of Hormuz and the potential for US strikes. The IRGC said four tankers were destroyed after striking mines south of the Strait and two other vessels were detained, while Tehran's Mayor said the Strait will not reopen until the US fulfils its commitments. CCTV reported that Tehran remains far from reaching an agreement with the US (in line with yesterday's reports), while Trump said "if Iran behaves, then we can sign something up". As a reminder, US Central Command reportedly has a plan to strike Iran as early as Wednesday.
Dutch TTF is firmer within a EUR 91.75-94.50/MWh range, after the IEA warned European gas reserves are at their lowest since 2013.
Spot gold surges to levels above USD 4,000/oz, within a USD 3,920-4,049/oz range (vs yesterday's USD 3,896-3,971/oz range), as the Democrats' projected sweep of Congress weighs on the USD and US yields, with markets pricing in a greater chance of legislative gridlock and downside risks to growth, while the complex could also be seeing hedging demand ahead of potential US strikes on Iran. Spot silver outperforms within a USD 48.97-51.98/oz range (vs yesterday's USD 48.62-50.87/oz range), while platinum and palladium futures are also firmer.
3M LME Copper is flat within a USD 13,832.48-14,084.00/t range (vs yesterday's USD 13,896.05-14,286.35/t range), having declined overnight as risk assets were hit on the increased prospects of a Democratic sweep and concerns over tighter AI regulation, in turn initially hitting data-centre-driven copper demand. The red metal has since recovered to flat as those concerns eased, with Republican wins in the Louisiana PSC races supporting the data-centre narrative and the Democratic trade fading, while the softer USD also provides some support.
IEA warns European gas reserves are at their lowest since 2013.
Marubeni (8002 JT) CEO expects the copper market to stay firm over the mid to long term, backed by strong demand from data centres and AI.
Brazil confirms another outbreak of Newcastle Disease at a poultry establishment in Santa Catarina state.
US Weekly Private Energy Inventory Data (bbls): Crude -5.3mln (exp. +1.9mln), Gasoline +1.4mln (exp. 0.0mln), Distillate -1.2mln (exp. +0.4mln), Cushing +0.5mln.

TRADE/TARIFFS

NOTABLE EUROPEAN HEADLINES

German Engineering Orders (Sep) +14% Y/Y (Domestic Orders +22%, Foreign Orders +11%), (Jul-Sep) +4% Y/Y (Domestic Orders +5%, Foreign Orders +3%); (Jan-Sep) +5% Y/Y (Domestic Orders Unchanged, Foreign Orders +7%), VDMA said.

NOTABLE EUROPEAN DATA RECAP

European HICP (Oct YY) 4.0% vs. Exp. 4% (Prev. 3.8%); European Core Inflation Rate YoY Flash (Oct YY) 2.5% vs. Exp. 2.5% (Prev. 2.5%).; European HICP (Oct MM) 0.4% (Prev. 0.6%).
European S&P Global Composite PMI Final (Oct) 51.7 vs. Exp. 51.9 (Prev. 53.1); European S&P Global Services PMI Final (Oct) 51.4 vs. Exp. 51.7 (Prev. 53.0).
UK S&P Global Services PMI Final (Oct) 52.8 vs. Exp. 53.1 (Prev. 52.1).
German S&P Global Services PMI Final (Oct) 52.5 vs. Exp. 51.7 (Prev. 52.9); German S&P Global Composite PMI Final (Oct) 53.4 vs. Exp. 52.8 (Prev. 53.8).
French S&P Global Composite PMI Final (Oct) 46.6 vs. Exp. 48.4 (Prev. 51.1); French S&P Global Services PMI Final (Oct) 46.2 vs. Exp. 48.4 (Prev. 51.2).
Italian S&P Global Composite PMI (Oct) 50.8 (Prev. 51.0); Italian S&P Global Services PMI (Oct) 52.0 vs. Exp. 51.5 (Prev. 51.7).
Spanish S&P Global Composite PMI (Oct) 56.8 (Prev. 56.8); Spanish S&P Global Services PMI (Oct) 57.2 vs. Exp. 57.6 (Prev. 58.3).
Spanish Unemployment Change (Oct) 43.128K vs. Exp. 18.7K (Prev. 23.587K).

CENTRAL BANKS

Riksbank raises its policy rate by 25bps to 2.00%, as expected; If the outlook for inflation and economic activity holds, it is likely that the policy rate will be raised further in the coming year.
ECB Wage Tracker - Annual, 2026: 2.3% (prev. 2.2%). Quarterly, Q3-2027: 2.4% (1st estimate).
PBoC steps up stock repurchase and increased holdings and re-lending policies, adds application for relending has exceeded CNY 200bln.

NOTABLE US HEADLINES

White House releases Trump proclamation regarding space and stated that the US is to return to the moon by 2028 under the Trump order.

GEOPOLITICS

RUSSIA-UKRAINE

Russia hits power stations in Ukraine's Kyiv and Zhytomyr regions.

US-IRAN

US President Trump said US has no immediate plan to strike Iran, according to FT. Trump suggested he was content with the state of the stand-off with Iran, even as he signalled he was prepared for more war if necessary, while he stated we seem to be getting everything we want. Trump responded "We’re locked and loaded if we need to go, but there may be no reason for it”, when asked about strong hints by Israeli PM Netanyahu that there would be an attack later this week.
Iran's leader warns of a much broader response if the US repeats its aggression, while dismissing expectations of a change in US behaviour following the midterm elections, Fars reports.
IRGC political affairs official said Iran will expel the US from West Asia and the Persian Gulf, Al Alam reported.
IRGC commander adviser said Iran would respond to any US or Israeli attack with a new doctrine and technology, warning that retaliation could extend beyond US bases in countries such as the UAE and Bahrain, NAYA reported. Warns if countries such as the UAE and Bahrain allow US forces to use their bases to attack Iran, Tehran's retaliation would extend beyond those bases.
Iran's Tehran Mayor Zakani said Iran has not sought nuclear weapons, but unconventional threats could prompt a change in the country's nuclear doctrine under the leadership's direction, Fars News reported. The Strait of Hormuz remains under the full control of the IRGC and Iranian military and will not reopen until the US fulfils its commitments, Tasnim reported.
IAEA chief Rafael Grossi said no nuclear activity or equipment was found inside Pickaxe Mountain during the agency's last inspection and stated that Tehran does not possess a nuclear weapon, Iran-linked Sabereen reported.
Iran describes US President Trump's midterm election defeat as another sign of Iran's victory in the war, while stating that Tehran's policies will remain unchanged regardless of which US party holds power, IRGC Telegram posted.
Iran is reportedly adopting guerrilla tactics, including rocket-propelled grenades and limpet mines, in an effort to reassert control over the Strait of Hormuz and disrupt oil shipments from the Persian Gulf, according to WSJ.
Iran's President Pezeshkian said Iran won't bow to coercion or imposed demands, according to Press TV.
IRGC said four tankers were destroyed after striking mines south of the Strait of Hormuz and that two other vessels were detained.
Satellite images show a fire in the Strait of Hormuz; a ship appears to have been targeted.
A senior Iranian official said yesterday Tehran remains far from reaching an agreement with the US to end the conflict, despite mediation efforts, CCTV reported citing unnamed sources.

SAUDI-HOUTHI

Saudi Civil Defence said a warning has been issued by the National Early Warning Platform in Najran.
Yemeni armed forces reportedly target sites in southern Saudi Arabia, Sabereen reported.

OTHER

US President Trump said he spoke with Israeli PM Netanyahu about money and support, while Trump adds that Netanyahu agrees with him.
South Korean military said North Korea fired multiple missiles from the Sondok area.
South Korea military said North Korea fires an unidentified projectile.

APAC TRADE

APAC stocks were somewhat mixed, with risk assets hit early in the session as participants digested the results from the US Midterm Elections, which pointed to a strong performance by Democrats, as betting markets priced a 99% probability of a Democrat sweep, in which some of the notable victories include North Carolina, South Carolina and Texas senate seats, marking the first Democrat win in the latter state since 1988.
ASX 200 declined as the downside was led by the mining, materials and resources sectors, although the losses in the broader market were somewhat cushioned by resilience in defensives and consumer stocks.
Nikkei 225 underperformed as tech was pressured on prospects of tighter AI regulation associated with what looks increasingly to be a blue wave following the Midterm Elections, but is well off today's lows.
KOSPI suffered amid the tech sell-off, while there were reports of North Korea conducting launches.
Hang Seng and Shanghai Comp weathered the stock sell-off in the region amid reports that the PBoC steps up stock repurchase and increased holdings and re-lending policies, while Chinese markets are also likely finding some solace as the increased likelihood of a Democrat sweep could restrict Trump tariff policies.

NOTABLE ASIA-PAC HEADLINES

Japanese Chief Cabinet Secretary Kihara said authorities will closely monitor market movements with a high sense of urgency.

NOTABLE APAC DATA RECAP

Chinese RatingDog Composite PMI (Oct) 52.0 (Prev. 52.4); Chinese RatingDog Services PMI (Oct) 50.8 vs. Exp. 51.5 (Prev. 51.6).
Australian Household Spending (Sep YY) 6.8% (Prev. 6.5%); Australian Household Spending (Sep MM) 0.6% vs. Exp. 0.2% (Prev. -0.1%).
Australian S&P Global Composite PMI Final (Oct) 48.20 vs. Exp. 47.7 (Prev. 47.70); Australian S&P Global Services PMI Final (Oct) 48.5 vs. Exp. 47.8 (Prev. 47.8).
New Zealand ANZ Commodity Prices MM (Oct) 0.6% (Prev. 0.6%).
New Zealand Labour Costs Index (Q3 QQ) 0.4% vs. Exp. 0.5% (Prev. 0.7%); New Zealand Labour Costs Index (Q3 YY) 2.0% vs. Exp. 2.1% (Prev. 2.1%); New Zealand Labour Costs Index (Q3 QQ) 0.4% vs. Exp. 0.5% (Prev. 0.7%).
New Zealand Employment Change (Q3 QQ) -0.1% vs. Exp. 0.4% (Prev. 0.5%); New Zealand Unemployment Rate (Q3) 5.7% vs. Exp. 5.5% (Prev. 5.6%).
Japanese Monetary Base (YY) -13.6% vs. Exp. -14% (Prev. -15.2%).