Asian stocks slump as Democrats take early midterm lead

Summary:

• US equity futures dropped after Democrats moved ahead in midterm counting for both chambers, with S&P 500 e-minis near 7,510 and Nasdaq futures near 27,710
• AI-related shares drove Asia's decline on concern that Washington will scrutinise data centres more closely: the Nikkei lost 4.4%, the Kospi 3.3% and the Kosdaq 2.5%
• Iran's Revolutionary Guards said mines destroyed four tankers south of Hormuz and that a US MQ-9 drone was downed. Neither assertion has been confirmed
• Brent changed hands near $103 and WTI near $96 while Iran-US negotiations stayed deadlocked
• New Zealand's jobless rate climbed to 5.7%, the highest in 11 years, weakening the argument for an RBNZ increase in December
• Beijing expanded its equity support and acted to check the yuan's advance, even as Shanghai and Hong Kong slipped
• BMW delivered a second profit warning, Canada reported headway in trade talks with Washington, and central bank gold purchases jumped

US midterm results spark risk-off move

Shares across Asia dropped heavily on Wednesday after initial US midterm results put Democrats in front for both the House and the Senate, pushing investors to sell AI-linked companies. By late in the Asian session neither chamber had been formally called.

Technology took the worst of the selling, with S&P 500 e-mini futures near 7,510 and Nasdaq futures near 27,710. What traders are pricing in is added friction for AI and data centre spending, plus possible gridlock and prolonged haggling over the debt ceiling and fiscal policy should Democrats win control of Congress.

Data centre infrastructure turned into a campaign topic. According to the Wall Street Journal, voter resistance to data centres is markedly bipartisan, although Democratic candidates have generally been warier of AI. Gubernatorial candidates in Georgia, Texas and Michigan have urged temporary halts to new data centre building.

Japan suffered the most in the region as it returned from a Tuesday holiday. The Nikkei dropped 4.4%, with losses deepening over the session as chip equipment maker Advantest, memory chip producer Kioxia, SoftBank Group and makers of fibre-optic cable were sold heavily. South Korea's Kospi shed 3.3% and the Kosdaq 2.5%, a reflection of that market's large exposure to AI chips.

The slump overshadowed robust overnight results from AMD and Super Micro Computer, which both beat forecasts and issued upbeat guidance on AI demand.

Iran tensions keep oil in focus

With tensions over the Strait of Hormuz escalating, Brent crude traded near $103 a barrel and WTI near $96.

The Islamic Revolutionary Guard Corps said four tankers had been destroyed and were still ablaze after hitting naval mines south of the strait, and that two more vessels had been detained. Afterwards it said it had brought down a US MQ-9 drone over the strait, describing it as the 56th of its kind. Independent confirmation of either claim was not available.

The statements came as a senior Iranian official told Reuters that Tehran and Washington were still far apart on a deal to end their war. Iran says the strait will remain shut until Washington waives oil sanctions, lifts its naval blockade and frees frozen funds. Qatari mediators said responses from both sides were due within 36 hours. President Donald Trump said the US was ready to act but may have no reason to, while Israeli Prime Minister Benjamin Netanyahu has hinted at an attack this week.

Washington also revised its security alert for Saudi Arabia, cautioning about possible Houthi strikes on airports and critical infrastructure and limiting staff travel to places that include the Qatif oil region and the Yanbu export hub.

New Zealand employment data disappoint

In the third quarter New Zealand's jobless rate climbed to 5.7% — an 11-year high — versus forecasts of 5.5%. Employment declined 0.1% and annual wage growth eased to 2.0%. After last week's surprise hold, the figures undercut the argument for the Reserve Bank of New Zealand to restart hikes in December, and two-year swap rates declined. Ahead of Saturday's general election NZD/USD traded near 0.560, while AUD/USD was near 0.696.

China adds support measures

Mainland markets barely moved, with the Shanghai Composite off 0.1% and Hong Kong's Hang Seng 0.2% lower. The People's Bank of China said applications under its share buyback loan programme had exceeded 200bn yuan, after cutting the scheme's rate to 1% and making it permanent following the CSI 300's worst month in a decade. The central bank also acted to check the yuan's advance, lifting lenders' foreign currency reserve requirement and setting a fixing far weaker than expected, which took the yuan to a two-week low. A private survey showed services activity growth easing to a three-month low in October.

Other developments to watch

BMW issued its second profit warning this year, lowering its 2026 automotive margin forecast to a range of minus 0.5% to plus 0.5%, pointing to faster job cuts, additional production costs and soft demand in China. Third-quarter results are scheduled for Wednesday.

Canadian Prime Minister Mark Carney said trade negotiations with Washington would step up, with some red lines taken off the table and the US asking for less while offering more, though significant areas are still unresolved.

Central bank gold buying climbed 42% in the third quarter, the World Gold Council said, offsetting a drop in jewellery demand. It expects Indian demand to fall to a six-year low in 2026 as high prices and a poor monsoon weigh on buyers.