By Ankur Banerjee
SINGAPORE, Nov 4 (Reuters) - US stock futures slumped, Treasuries rallied and the dollar softened on Wednesday as Democrats notched early Senate wins, fuelling bets they could wrest control of the chamber from President Donald Trump's Republicans, though the final outcome remained uncertain.
In North Carolina, former Governor Roy Cooper easily defeated Trump-backed Republican Michael Whatley to flip a Republican-held Senate seat, according to media projections, handing Democrats one
of the four net gains they need to secure a majority.
Democrat Jon Ossoff won re-election in Georgia. Democrats are favoured to capture the House, while the fight for the Senate remains a closely contested state-by-state battle, keeping investors on edge as they gauge the implications for Washington's balance of power.
"Markets appear to be pricing in the possibility of a stronger-than-expected Democratic showing, which could reduce expectations for further fiscal stimulus," said Charu Chanana, chief investment strategist at Saxo in Singapore.
Prediction markets signalled growing expectations of a Democratic sweep of the US Congress, with more than $1.48 billion wagered on the midterm elections in a fresh test for the novel markets.
Futures for the S&P 500 slid 0.8% while Nasdaq futures fell 1.8%. The yield on the benchmark US 10-year Treasury note fell 6 basis points to 4.906%.
Tuesday's outcome could hold broad implications for market-sensitive areas including the AI dead-centre buildout, the US fiscal outlook, defence spending and regulation in areas such as healthcare, banking and cryptocurrencies.
Indeed, Chanana said the sharper decline in Nasdaq futures reflects concerns that a shift in political control could bring greater regulatory scrutiny of AI and Big Tech, at a time when investors are already questioning elevated valuations and rising AI spending.
"However, lower Treasury yields could eventually provide some relief, so the initial selloff may not necessarily be sustained," she said.
In currencies, the dollar slid broadly against major currencies. The euro rose 0.4% to $1.1239, while sterling firmed 0.37% to $1.3464. That left the dollar index 0.32% lower at 101.39. [FRX/]
In Asia, stocks reversed earlier gains to trade lower as investors brushed off strong earnings from chipmaker AMD that appeared to ease some concerns over the durability of the AI trade.
The forecast and market-beating third-quarter results offered a strong counterpoint to mounting fears that the AI boom is losing steam after rival Intel issued a weak outlook last week.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5%. South Korea's KOSPI slid 1.6% while Japan's Nikkei fell 3% after returning from a holiday.
In the oil market, prices were choppy on Wednesday after sliding to a four-week low in the previous session as investors weighed talks to end the wars in Ukraine and Iran against worries that recent attacks in both conflicts could further disrupt supplies.
The effective blockade of the critical Strait of Hormuz that links the Gulf to world markets, previously a conduit for 20% of global oil supplies, has redrawn energy flows, stoked inflationary worries and upended the global rates outlook.
(Reporting by Ankur Banerjee in Singapore; Editing by Shri Navaratnam)
