GLOBAL MARKETS-AI stocks, oil fall as investors bet on change after US election 'blue wave'

Chip stocks and the ‌dollar fell ​on Thursday, while oil steadied around recent lows and broader share prices, gold and other assets rose after a sweeping Democratic victory in US midterm elections raised hopes for an end to the US-Iran war. Brent crude futures dived nearly 9% overnight, falling below $100 a barrel for the first time in two months. The price ‌has dropped by about 20% so far this week, heading for its largest weekly loss since April 2020.

Tumbling energy prices encouraged a rally in bonds, which lowered US yields, kept the dollar around one-month lows against the euro, and helped stocks. The MSCI All-World index was up 0.1%, having posted its biggest one-day gain since late July on Wednesday. In Europe, the STOXX 600 rallied another 0.7%, bringing the index to within a whisker of August's record ‌high.

"When it comes to the headline result, it’s not too different from investor expectations beforehand, even if the scale of the Democratic victory was bigger than expected," Deutsche Bank strategist Jim Reid said. "In many respects, ‌the overall rally fits into the classic midterm pattern we’ve previously highlighted. After all, in 20 out of 20 midterm elections since World War Two, the S&P 500 has been higher one year later," he said.

Overnight on Wall Street, the benchmark indexes rallied as investors took heart from the clear outcome, with the S&P 500 closing 1.6% higher, although tech stocks continued to struggle as investors fear greater scrutiny over AI infrastructure build-out. The Philadelphia semiconductor index fell 3.1%, having lost a quarter of its value in a month.

Democratic data-centre opponents who ⁠campaigned, in part, ​on moratoriums on data centre construction won victories in Texas and ⁠Georgia. Futures on the Nasdaq 100 were down 0.7%, while those on the S&P itself fell just 0.1%.

SELL CHIPS, BUY BANKS Tech stocks in Europe make up a smaller part of the broader market, which is more heavily dominated by banking shares and drugmakers. Those ⁠sectors jumped on Thursday. Within the regional tech sector, semiconductor-exposed stocks such as ASML , Soitec and Infineon fell between 1.2% and 4%.

Asian markets, which are heavily exposed to AI-related stocks, suffered losses, with South Korea's chipmaker-heavy KOSPI down nearly 6% near seven-month ​lows. Masahiko Loo, chief fixed income strategist at State Street Investment Management, said Democratic control raises the prospect of tougher scrutiny around data centres, power demand and consumer costs, but does not mean a free ⁠hand as 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 stocks, which have been targeted by the Trump administration over the past almost-two years, rallied, with Denmark's ⁠Orsted ​and Vestas up 2.6% and 1%, respectively.

OIL SLIDES ON HOPES OF END TO IRAN WAR Crude oil, meanwhile, was last up 0.8% on the day, at $95 a barrel, having lost nearly 10% in two days, as traders chose to bet that Trump, facing a Democratic Congress and hurt by high energy prices caused by the Mideast conflict, would be less likely to escalate the war with Iran.

Trump acknowledged on Wednesday that the war ⁠played a role in Republicans' defeat and his vice president, JD Vance, was even more blunt on X: "The reason we lost is the war." With the dollar and oil under pressure, gold traded above $4,100 an ounce, ⁠having risen 5% in two days, its largest two-day jump ⁠since early April.

Bond prices gained as well, pushing yields on the benchmark 10-year US note down 2 basis points to 4.87%. In currencies, the dollar was broadly weaker, with investor focus on the Bank of England's policy announcement later on Thursday.

The central bank is expected to raise rates to contend with inflation pressure from soaring ‌energy costs, although it may push back ‌against investor bets that several more increases will follow next year. (Additional reporting by Tom Westbrook and Rae Wee ​in Singapore; Editing by Sonali Paul, Sam Holmes, Philippa Fletcher)