US stocks rose as investors weighed The Democrats’ victories in the midterm elections, with hopes that a Democratic-controlled Congress could constrain Donald Trump’s policymaking helping ease earlier concerns about the impact on economic growth.

The Dow Jones gained 2%, while the Nasdaq and S&P 500 each rose by more than 1%. The gains reversed overnight declines in US stock futures after Democrats secured control of both the Senate and the House of Representatives.

The dollar moved in the opposite direction, falling against major trading partners and reaching a one-month low on Wednesday. The dollar index, which tracks the currency against a basket of six others, also dropped to its lowest level in a month. The pound reached its highest level since mid-September, while the euro, yen and Swiss franc gained.

Investors moved into US Treasuries amid expectations of political gridlock. The yield on the 10-year Treasury fell 4.7 basis points to 4.918%, while the two-year yield declined 3.7 basis points to 4.597%. Bond yields fall as prices rise.

European markets also advanced in early trading. London’s FTSE 100 rose 0.2%, Germany’s Dax gained almost 0.6%, France’s Cac 40 climbed 0.4% and Italy’s FTSE MIB rose nearly 1.4%. Banks and clean-energy companies were among the stronger performers, with European bank stocks up 2.8%. Vestas gained nearly 5% and Ørsted rose 7.4%.

The election results also raised questions about possible changes to AI regulation and investment. AI-related shares fell during Asian trading, as investors considered whether a Democratic Congress might increase scrutiny of the sector or slow spending on data centres. ING’s global head of markets, Chris Turner, said speculation about the impact on AI investment had briefly affected markets.

Gold, another traditional safe-haven asset, rose 2.2% to above $4,000 an ounce. IG chief technical analyst Axel Rudolph said the scale of the Republicans’ losses was prompting investors to reassess Trump’s ability to advance his agenda, putting pressure on the dollar and supporting gold and silver.

Some companies linked to Elon Musk fell in premarket trading: SpaceX was down 5% and Tesla more than 4%, according to Kathleen Brooks, UK research director at XTB. Brooks said investors were also considering whether a Democrat-controlled Congress could bring greater scrutiny of AI companies and affect a potential merger involving Musk’s businesses.

Although control of Congress has changed, Trump can still influence markets through trade and tariffs, foreign policy and existing regulations, said Tai Hui, a market strategist at JP Morgan Asset Management. Analysis of the election’s implications for policy and markets was continuing.

Sources: The Guardian Business.