Democrats Sweep Midterms as Oil Plunges and Yields Fal

• The Democrats swept the US midterm elections, taking control of both the House and Senate. Brent crude plunged 8.7% to US$94.62 as markets priced in the potential for reduced geopolitical tensions.
• US equities rebounded sharply from early losses, with the S&P 500 closing 1.6% higher and Nasdaq gaining 1.4%. US Treasury yields also declined, with the 10-year falling around 7bps to 4.89%, supported by easing inflation concerns and expectations of more restrained US fiscal spending.
• Overnight US economic data was mixed, with October ADP private payrolls rising 86,000, ahead of expectations. Meanwhile, ISM services eased to 54.5 from 54.9, while the September trade deficit narrowed slightly.
• Locally, the RBA’s 25bp hike to 4.85% remains in focus, with updated forecasts showing inflation staying above 3% until late 2027. The sharp decline in oil prices may provide some relief to inflation expectations, although persistent domestic price pressures remain a key consideration for the RBA.