Morning wrap (04.11.2026)

Democrats have secured control of both the Senate and the House of Representatives, confirming earlier signs of a "blue wave." The party also delivered exceptionally strong results in traditionally Republican states, winning Senate seats in Texas, South Carolina, Kansas, and Iowa, while retaining key seats in Georgia and New Hampshire.

The exact scale of the Democrats' victory in both chambers has yet to be determined.

With a Democratic-controlled Congress and Donald Trump in the White House, the next two years will be characterized by divided government. Further tax cuts, deregulation, and major legislative initiatives will become significantly more difficult to implement, while congressional oversight is likely to increase.

Trump, however, retains broad executive powers, particularly in trade and foreign policy. The election results therefore do not automatically signal a reversal of tariffs or a change in Washington's policy toward Iran.

Following the election results, the U.S. 10-year Treasury yield declined to around 4.90%. The dollar also weakened (USDIDX -0.36%) as investors scaled back expectations for further tax cuts and fiscal expansion. The market reaction therefore reflects both the changing political landscape and lower expectations for U.S. economic growth and fiscal stimulus.

Technology stocks came under pressure as markets began pricing in the possibility of tighter restrictions on AI infrastructure expansion. Opposition to data centers is growing amid concerns over energy costs, water consumption, and pressure on local infrastructure. However, these risks are primarily concentrated at the state and local levels rather than stemming from a single, coordinated federal Democratic policy.

Democrat Gina Hinojosa defeated Greg Abbott in the Texas gubernatorial election, while James Talarico won the Senate race. Hinojosa campaigned on greater oversight of data center development, a particularly important issue for Texas, which is one of the largest markets for planned AI infrastructure in the United States.

US100 (Nasdaq 100) fell by more than 2% at one point before recovering some of its losses. In Japan, JP225 (Nikkei) is down 1.33%, with SoftBank and semiconductor stocks among the biggest losers. Korean and Taiwanese chipmakers also came under pressure. The move appears to be driven primarily by a repricing of regulatory risks and expectations surrounding AI capital expenditure.

The conflict with Iran likely weighed on Republicans through higher energy prices and rising living costs. However, voter survey data indicate that broader economic concerns, corruption, and the scope of presidential power were also important factors. The war should therefore be viewed as one of several significant drivers of the election outcome.

A Democratic-controlled Congress could increase political pressure and oversight of the administration, but Trump still retains broad powers over national security. Markets should therefore not automatically price in an end to the conflict with Iran. Pressure for de-escalation may increase, but key decisions remain in the hands of the White House.

The conflict with Iran remains ongoing. IRGC reports that four oil tankers were destroyed by mines have yet to be independently confirmed. Tehran is making the reopening of the Strait of Hormuz conditional on sanctions relief, the release of frozen assets, and an end to the U.S. blockade.

New Zealand's unemployment rate rose to 5.7%, its highest level in 11 years. Employment declined and wage growth slowed. The data strengthen the case for the RBNZ to keep interest rates unchanged following last week's pause.