Global markets woke up to a new political map on Wednesday — and spent the morning working out what a Democratic Congress means for profits, spending and the AI boom.
Key Points
- The FTSE 100 edged up 4.43 points to 10,642.86 at the London open, with miners offsetting defence losses; the FTSE 250 fell 0.1%.
- Defence stocks fell — BAE Systems down 5.2% and Babcock down 3.2% — on expectations of lower US defence spending under a Democratic Congress.
- Miners rose — Fresnillo up 3.8%, Endeavour Mining up 3.4%, Anglo American and Antofagasta both up 2.4% — and Lion Finance led FTSE gainers, up 4.4% on higher profit.
- US stock futures rose on Wednesday after reversing early losses, and the pound was quoted at $1.3482, up from $1.3416 at Tuesday’s London close.
Why defence fell and miners rose
The market logic was straightforward. A Democratic sweep raises questions about AI regulation, energy policy, corporate taxation, antitrust enforcement and data-centre permitting, analysts said — and about defence budgets in particular. Defence contractors, whose order books depend on US spending, fell first and furthest.
Miners moved the other way, helped by firmer commodity prices and by Brent crude trading at $104.00 a barrel early Wednesday, up from $103.24 late Tuesday, as investors continued to monitor the Middle East. In Asia, the Nikkei closed down 1.4%, while Shanghai rose 2.2%, Hong Kong gained 1.7% and Sydney fell 0.6% — a mixed picture that matched the mixed message from Washington.
Wall Street’s overnight verdict
On Tuesday, Wall Street had ended mixed — the Dow down 0.4%, the S&P 500 up 0.4% and the Nasdaq up 0.8% — before the full scale of the Democratic win was clear. On Wednesday, US futures reversed early losses and rose as investors weighed what divided government, now with a Democratic Congress, means for AI spending and regulation.
The 10-year US Treasury yield was quoted at 4.93% early Wednesday, little changed from 4.94% on Tuesday — a sign that bond markets, at least, were not panicking. Still to come on Wednesday’s calendar: the UK composite PMI, eurozone inflation, the US ADP employment report and US trade figures, each capable of moving the story again.
The sector split also tells a story about what investors think a Democratic Congress will and will not do. Defence, dependent on government orders, is seen as exposed; miners, tied to commodity prices and global demand, are seen as insulated. Technology sits in between — exposed to regulation, but supported by earnings like AMD’s, which landed on the same morning.
What happens next
Markets rarely price a political earthquake in a single morning. The first test comes when the new Congress returns on 9 November and starts signalling its priorities — on spending, on AI, on taxes. Until then, Wednesday’s pattern is the market’s opening guess: less for defence, more for miners, and a wait-and-see on the AI trade that AMD’s results, also out overnight, did much to support.