The Political Shift In The United States Has Triggered A Sharp Decline In Oil Prices And A Renewed Investor Rotation Into Risk Assets

The strong rebound on Wall Street on Wednesday reflects a classic relief rally following the removal of a key source of political uncertainty. By the close, the Dow Jones (US30) gained 3.03%. The S&P 500 (US500) advanced 1.58%, while the technology-heavy Nasdaq (US100) ended the session up 1.44%. Political gridlock in Washington and the prospect of constraints on large-scale fiscal spending have significantly eased pressure on the bond market, prompting capital flows into credit-sensitive and rate-sensitive sectors. Combined with the sharp collapse in oil prices toward $88 per barrel and softer inflation expectations, investors are rapidly pricing in lower risks of further Federal Reserve monetary tightening.

The Canadian dollar (CAD) surged to a two-month high of 1.39 per US dollar, highlighting a localized redistribution of trade and monetary policy risks across North America. Republicans’ loss of absolute control over Congress following the midterm elections has reduced uncertainty surrounding White House trade policy, lowering the risk of further tariff escalation under the USMCA framework that has persisted since early 2025. The loonie is also receiving fundamental support from improving domestic macroeconomic indicators. Canada’s record trade surplus of C$5.4 billion, significantly above expectations of C$4.1 billion, confirms the resilience of external demand.

In Europe, Germany’s DAX (DE40) rose 2.22%, France’s CAC 40 (FR40) gained 1.96%, Spain’s IBEX 35 (ES35) advanced 3.00%, and the UK’s FTSE 100 (UK100) closed 1.79% higher. The Democratic Party’s takeover of both chambers of Congress reduces the likelihood of aggressive unilateral fiscal and tariff initiatives from Washington, easing some external pressure on Europe’s corporate sector. Coupled with declining US Treasury yields and the continued plunge in oil prices, European equity markets benefited from a strong disinflationary impulse.

The Riksbank’s first rate hike since September 2023, raising its policy rate to 2.00%, underscores the growing divergence of monetary policy paths across Europe. Unlike the ECB, which has adopted a wait-and-see approach amid France’s fiscal crisis, the Riksbank under Governor Erik Thedéen has moved decisively in response to rising supply-chain-related costs and improving economic activity. Sweden’s GDP expanded by 0.4% quarter-over-quarter in Q3, exceeding the consensus expectation of 0.3%.

The freefall in WTI crude prices to $88 per barrel, down 8% during the session, points to a rapid reshaping of the global energy landscape following the political shift in the United States. The US administration’s acknowledgment that elevated gasoline prices and the conflict with Iran contributed to Republican losses in the midterm elections has elevated the pursuit of a peace agreement to a top White House priority. Losing control of both chambers of Congress constrains military spending initiatives and leaves diplomatic engagement through Qatar as the only realistic channel for stabilization.

In Asia, Japan’s Nikkei 225 (JP225) declined 1.42%, China’s FTSE China A50 gained 1.23%, Hong Kong’s Hang Seng (HK50) rose 1.67%, while Australia’s ASX 200 (AU200) closed 0.59% lower.

Indonesia’s GDP growth accelerated to 5.47% year-over-year in the third quarter of 2026, exceeding both the 5.20% consensus prediction and the previous quarter’s 5.29% reading, highlighting the underlying resilience of Southeast Asia’s largest economy. Household consumption, which grew 5.04%, remains the primary growth engine, supported by targeted government subsidies that help offset the impact of elevated interest rates and inflationary pressures. Growth over the first nine months of the year reached 5.45%, surpassing the government’s 5.4% target and providing Bank Indonesia with additional policy flexibility.

The Australian dollar (AUD/USD) climbed back above the 0.7000 level after touching two-week lows, demonstrating the currency’s strong sensitivity to shifts in global risk sentiment and commodity market dynamics. The Democratic victory in the US Congress and prospects for diplomatic de-escalation in the Middle East triggered a sharp decline in the US Dollar Index (DXY) and renewed demand for pro-cyclical, higher-yielding G10 currencies. Australia’s unexpected trade surplus of A$2.826 billion in September, versus expectations for a deficit, confirmed the resilience of iron ore and liquefied natural gas (LNG) exports, substantially reinforcing the country’s current-account fundamentals.

• S&P 500 (US500) 7,688.62 +119.70 (+1.58%)

• Dow Jones (US30) 51,786.72 +1,569.40 (+3.03%)

• DAX (DE40) 26,437.67 +573.05 (+2.22%)

• FTSE 100 (UK100) 10,829.21 +1.79 (+190.78%)

• USD Index 101.53 -0.34 (-0.33%)

News feed for: 2026.11.05

• Japan Monetary Policy Meeting Minutes at 01:50 (GMT+2) – JPY (MED)

• Australia Trade Balance (m/m) at 02:30 (GMT+2) – AUD (MED)

• Japan Services PMI (m/m) at 02:30 (GMT+2) – JPY (MED)

• Sweden Inflation Rate (m/m) at 09:00 (GMT+2) – SEK (MED)

• Switzerland Unemployment Rate (m/m) at 10:00 (GMT+2) – CHF (MED)

• Norway Norges Rate Decision at 11:00 (GMT+2) – NOK (HIGH)

• Eurozone Producer Price Index (m/m) at 12:00 (GMT+2) – EUR (MED)

• UK BoE Interest Rate Decision at 14:00 (GMT+2) – GBP, UK100 (HIGH)

• UK BoE Rate Statement at 14:00 (GMT+2) – GBP, UK100 (HIGH)

• UK BoE Gov Bailey Speaks at 14:30 (GMT+2) – GBP, UK100 (MED)

• Switzerland SNB Chairman Schlegel Speaks at 14:40 (GMT+2) – CHF (LOW)

• US Initial Jobless Claims (w/w) at 15:30 (GMT+2) – USD (MED)

• Canada BOC Gov Macklem Speaks at 17:30 (GMT+2) – CAD (LOW)

• US Natural Gas Storage (w/w) at 17:30 (GMT+2) – XNG (HIGH)

• Eurozone ECB President Lagarde Speech at 20:00 (GMT+2) – EUR (LOW)

• Mexico Interest Rate Decision at 21:00 (GMT+2) – MXN (HIGH)