Asian equities and US stocks futures slump amid blue sweep in US polls

US stock futures and Asian equities tumbled along with dollar as early results of US midterm polls rippled through markets, threatening President Donald Trump’s agenda amid a potential Democratic sweep.

Futures for the benchmark S&P 500 index slid 1.06 per cent, at 6.30am time, giving up an earlier 0.5 per cent advance as early election results started rolling on Wednesday. The tech-heavy Nasdaq 100 futures declined 1.9 per cent while those of Dow Jones index fell 0.7 per cent.

The US dollar fell against its group of 10 peers. While stock-index future slid US Treasuries benefitted, with yield on the benchmark 10-year Treasury note declining seven basis points to 4.89 per cent, according to Bloomberg data.

Stocks index-futures slid as investors fear a Democratic controlled House and that their control of the Senate will result in tighter regulations and a closer scrutiny of the tech-heavy sectors, including artificial intelligence companies.

Treasuries, however, stand to gain as a political haggling in Washington is bound to limit government spending, easing borrowing concerns.

“Early headlines and prediction markets are suggesting a rising probability of a blue wave,” Bloomberg quoted Andrew Ticehurst, a senior rates strategist at Nomura Holdings, as saying. “That scenario is generally regarded as being negative for the dollar and positive for US Treasuries. Markets are reacting consistently with that in early Asia trading.”

A blue wave in US politics refers to a large electoral victory for the Democratic Party, whose traditional political colour is blue.

Asian stocks

In Asia, equities benchmarks slid, reversing earlier gains, taking the cues from US stock futures.

MSCI's broadest ⁠index of Asia-Pacific shares outside Japan fell 0.5 per cent. South Korea's Kopsi slid 3.6 per cent, giving up its earlier more than 3 per cent gains. Japan's Nikkei index fell 3.5 per cent, while Hang Seng index in Hong Kong slipped 0.22 per cent. China’s Shanghai SE index also retreated 0.21 per cent. Stocks in India are also set to open lower.

"Markets appear to be pricing in the possibility ​of ⁠a stronger-than-expected Democratic showing, which could reduce expectations ‌for further fiscal stimulus," Reuters quoted Charu Chanana, chief investment strategist at Saxo in Singapore, as saying.

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Blue sweep

Democrats are projected to win big in Tuesday's midterms, flipping both a Senate seat and a House of Representatives seat in North Carolina and picking up a governorship in Georgia.

As of 9.45pm Washington time, Democrats were projected to win 45 Senate seats compared to Republicans' 36, with 19 races still to be called, according to AP. Democrats have also flipped the North Carolina seat with a win by Roy Cooper. The party needs 51 seats to gain a majority.

The Democrats have also taken control of the US House of Representatives, CNN and CBS projected on Tuesday, a momentous development that will reshape the course of President Donald Trump's final two years in power.

The Democrats only needed to flip three Republican-held seats to take control of the chamber and initial results showed they had easily surpassed that threshold.

Democratic control of the House means they will block Mr Trump's legislative agenda and open investigations into his administration's policies.