A Democratic sweep of the US midterms reshaped the macro narrative this week starting from November 9, triggering a sharp unwinding in AI and technology equities and a steep repricing of oil on hopes of an Iran settlement, even as a robust jobs report kept the Federal Reserve on a higher for longer path.
The dollar index initially fell to a one-month low of 101.09 as a divided government reduced expectations of fresh fiscal expansion. However, the currency reversed course after a stronger-than-expected October employment report, rising to a weekly high of 102.4 and finishing near 102.3. Payrolls increased by 1,65,000, compared with expectations of around 65,000, while unemployment declined to 4.1 percent. Wage growth of 0.4 percent month-on-month and 3.1 percent year-on-year also exceeded forecasts. Together with upward revisions totalling 84,000 jobs for August and September, the data suggested that the summer slowdown was less pronounced than previously feared.
Weekly jobless claims also declined, reinforcing signs of labour-market resilience. CME data show roughly a 75 percent probability of a December hike, with Cleveland Fed President Beth Hammack and Richmond Fed President Thomas Barkin favouring modest increases to contain elevated inflation. The 10-year Treasury yield rose to about 4.90 percent on Friday but remained lower on the week. US equities recorded their steepest single-day decline as investors assessed whether Democratic control of Congress could result in greater regulatory scrutiny, potentially slowing AI infrastructure and data-centre development.
Gold and silver staged a sharp recovery from one-year lows, with spot gold surging to $4,145 an ounce and silver $53.5 an ounce. The rebound had several drivers. A steep fall in oil eased inflation and rate hike concerns, Treasury yields extended a run of weekly declines, the dollar weakened after the election.
Hopes of a quick resolution to the Iran conflict also reduced the inflationary premium that had been weighing on non-yielding assets. The gains were pared on Friday as stronger payrolls lifted the dollar and yields, a reminder that the rate path remains the dominant constraint. Even so, gold held above $4,060 an ounce and silver near $52 an ounce, leaving both with weekly gains of over 5 percent.