Asian markets tumble as US midterm results boost Democrats and pressure AI stocks
Early US midterm counts showing Democratic leads triggered a sell-off in Asian equities, especially AI-linked shares, while tensions in the Strait of Hormuz kept oil prices steady.
Asian equity markets fell sharply on Wednesday after early US midterm results indicated Democratic leads in both chambers of Congress. The Nikkei dropped 4.4%, South Korea's Kospi slipped 3.3% and the Kosdaq fell 2.5%, with AI-related chip and data-centre stocks bearing the brunt of the sell-off.
"Investors are pricing in tougher scrutiny of AI and data-centre investments and the prospect of a divided Congress," said a market analyst familiar with the trade.
US futures mirrored the trend, with S&P 500 e-mini contracts trading around 7,510 and Nasdaq futures near 27,710. Traders cited concerns over potential gridlock on fiscal policy and a more sceptical stance toward AI from Democratic candidates, some of whom have called for temporary bans on new data-centre construction.
In Japan, the decline was led by chip equipment maker Advantest, memory chip producer Kioxia, SoftBank Group and fibre-optic cable manufacturers. South Korean markets were similarly weighed down by exposure to AI chips, despite after-hours gains from AMD and Super Micro Computer, which both reported earnings above expectations and raised AI-related revenue outlooks.
Oil prices remained steady, with Brent around $103 a barrel and WTI near $96, as tensions in the Strait of Hormuz persisted. Iran’s Islamic Revolutionary Guard Corps claimed four tankers were destroyed by mines and that a US MQ-9 drone was shot down, though the assertions were not independently verified. President Donald Trump said the United States was prepared to act if necessary, while Israeli Prime Minister Benjamin Netanyahu hinted at a possible attack.
The United States also raised its security alert for Saudi Arabia, warning of potential Houthi attacks on airports and critical infrastructure and restricting staff travel to several oil-related sites.
New Zealand reported an unemployment rate of 5.7% for the third quarter, the highest in 11 years, weakening expectations for a Reserve Bank of New Zealand rate hike in December.
In China, the Shanghai Composite edged down 0.1% and Hong Kong’s Hang Seng fell 0.2% as the People’s Bank of China announced a permanent share-buyback loan scheme with applications exceeding 200 billion yuan, while also moving to curb the yuan’s rally by raising foreign-currency reserve requirements and setting a weaker daily fixing, sending the currency to a two-week low.
BMW issued a second profit warning for the year, cutting its 2026 automotive margin forecast to a range of –0.5% to +0.5% amid weaker demand in China and higher production costs. Canada’s trade minister Mark Carney said negotiations with the United States would intensify, with some red lines removed but key issues still unresolved.
The World Gold Council reported a 42% rise in central-bank gold purchases in the third quarter, offsetting a slump in jewellery demand, while forecasting a six-year low in Indian gold demand for 2026 due to high prices and a weak monsoon.