World stock markets climbed on Wednesday after the U.S. midterm election divided control of Congress, but the vote’s outcome, which cast doubt on further U.S. tax cuts, hit the dollar and sent Treasury yields lower.
While gridlock in Washington could hamper President Donald Trump’s political and economic agenda, few expect a reversal of tax cuts and financial deregulation measures that have already been enacted.
That view helped all three Wall Street equity indices extend gains, and investors piled into growth sectors such as technology and healthcare.
The Dow Jones Industrial Average rose 262.58 points, or 1.02 percent, to 25,897.59, the S&P 500 gained 33.77 points, or 1.23 percent, to 2,789.22 and the Nasdaq Composite added 124.50 points, or 1.69 percent, to 7,500.46.
The Democrats looked headed to gain more than 30 seats in the House of Representatives, well beyond the 23 they needed to claim their first majority in eight years. With Trump’s Republican party holding on to its Senate majority, the results from Tuesday’s election were in line with expectations.
“The good news in a way for markets is that there was an uncertainty that’s now been removed. We know where we stand for the next two years, and investors will focus back on the fundamentals, which are (company) earnings growth and the economy,” said Guy Miller, chief market strategist at Zurich Insurance Group.
Still, a split Congress could hamper Trump’s push for a further round of tax cuts and deregulation, measures that have turbocharged the U.S. economy, stock markets and the dollar.
MSCI’s gauge of stocks across the globe gained 1.02 percent, while the pan-European STOXX 600 index rose 1.06 percent.
Riskier European bonds such as those from Italy were in demand, with yields falling 6-9 basis points.
The U.S. Federal Reserve starts its two-day monetary