Broad-Based Republican Defeat Sends Equities and Gold Higher and Long-Term Interest Rates and Dollar Lower
November 4, 2026
In 2027 and 2028, Democrats will hold majorities in the Senate, the House of Representatives and state governorships. With a gain of seven senate seats that flipped from Republican to Democrat, the senate ratio becomes 54 Dems to 44 Reps and 2 independents who tend to caucus with the Democrats. Among declared House races, the Dem total of 228 so far assures a majority and exceeds known Rep winners by 89 so far. Republicans lot five governor races. The GOP had held more than Democrats for the past 16 years, but among the 48 known state governors going forward, the GOP count of 20 trails the Dem total of 28, with just two races yet to be declared.
Although MAGA will still control two branches of the U.S. federal government, domestic policy extremes should lessen, providing a check against budgetary malfeasance, regulatory neglect, and the ability of the Federal Reserve to conduct monetary policy free from political interference. Tariff policy should become more predictable and less inflationary. President Trump as commander in chief should still have plenty of flexibility and control in matters of foreign policy.
Dollar declines overnight ranged from 0.5-0.7% against the euro, Swiss franc, sterling as well as both Aussie and New Zealand dollars. The greenback dropped 0.9% against the Mexican peso but just 0.2% relative to the yen, Israeli Shekel and Indian rupee. Indonesia’s rupiah held steady.
Ten-year sovereign debt yields declined by nine basis points in France, eight bps in Italy, 7 bps in Great Britain, 4 basis points in the United States, 3 bps in Canada and Germany and 2 bps in Switzerland. The 10-year Japanese JGB bucked that trend and instead rose by four basis points.
One of the clearest messages from yesterday’s U.S. election results was massive dissatisfaction with the war in Iran and a perceived direct line drawn from that conflict to the rise in U.S. inflation. It remains to be seen if a way to get out of that mess sooner rather than later, but the immediate reaction of oil prices has been a drop of 2.5% in both the West Texas Intermediate and Brent crude costs.
Stock markets closed up 2.2% in China, 1.7% in Hong Kong and 1.4% in Japan. Within a half hour after today’s opening bell on Wall Street, all four major equity barometers had climbed between 1.6% and 2.2%. Stock market gains in Germany, Spain, Italy and France range currently from 2.1-3.3%, while the British Ftse trails slightly with a rise of 1.8%.
The Executive Board of the Swedish Riksbank engineered its first interest rate hike since September 2023 in a move that had been telegraphed earlier as likely. the rate was lifted to 25 basis points to 2.0% from a low of 1.75% maintained for the past 14 months. A released statement considers Sweden’s monetary stance accommodative even after today’s move and identifies a strengthening trend in Swedish economic activity, a weaker krona, and inflationary pressures due to supply disruptions linked to the war in the Middle East. Officials now project inflation moving above 2.0% next year and add that “if the outlook for inflation and economic activity holds, the Riksbank assesses that it is likely that the policy rate will be raised further in the coming year.”
The Central Bank of Uzbekistan, by contrast, has for sometime now had a tight monetary stance, with a policy interest rate of 14.0% since March 2025. That’s more than double the latest on-year 6.4% rise in consumer prices. So once again this week’s policy review left the interest rate unchanged, especially since inflation is not seen likely to fall to 5% until late 2027.
The U.S. goods and services trade deficit printed at $105.0 billion in September, similar to August’s imbalance but well above the $76.1 billion deficit in September 2025 or the $69.7 billion average deficit during the first eight months of this year.
Canada experienced a C$ 5.35 billion trade surplus in September, roughly 30% wider than consensus expectations.
October purchasing manager survey results for many more countries were reported today. Another robust set of readings from the S&P Global-compiled composite (55.9) and services (56.1) indices, the “good news on growth was tainted by yet another worrying intensification of inflationary pressures and some disappointing forward-looking indicators from the survey.” The ISM-compiled U.S. non-manufacturing survey also printed in the mid-50s with a 3-month low of 54.5.
Euroland’s composite and service sector PMI scores for October got revised a bit lower to 4-month lows of 51.7 and 51.4.
Britain’s composite and service PMI readings of 52.9 and 52.8 constituted 8-month highs.
India’s composite and service sector PMIs rose to 4-month highs of 56.2 and 55.8, but China’s readings of 52.0 and 50.8 were at 3-month lows. Australia’s composite PMI was revised somewhat higher but, at 48.2, was the lowest since May. Australia’s service sector PMI of 48.5 was a 7-month low. PMI indices of Swedish composite (55.0) and services (55.7) were at 2- and 3-month low but still in robust territory.
Private PMI readings rose in Hong Kong to a 3-month high of 50.2 but bell in Lebanon to a 5-month low of 49.8. The United Arab Emirates non-oil PMI reading of 54.8 was a 3-month low.
Preliminary consumer price figures for the euro area in October matched expectations but showed further acceleration and thus support market speculation that the ECB interest rates will be lifted higher at the December scheduled policy review of 2026. Overall inflation touched 4.0%, the first time at or above that level in 37 months and almost twice January’s reading of 2.1%. Core inflation stayed at 2.5%, also as had been anticipated. Energy (+20.8%) was the main driver of inflation, but components for food and services also were higher at 1.6% and 3.3%. Compared to CPI inflation in October 2025, France (3.8% vs 0.8%), Italy (5.6% vs 1.3%) and Spain (4.9% vs 3.2%) each picked up very sharply.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Central Bank of Uzbekistan, composite and service sector PMIs, Euroland CPI, Swedish Riksbank, U.S. and Canadian trade balances, U.S. midterm election results
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