Deutsche Bank flags rotation away from AI after midterms

US stocks had their best day in three months after the midterm elections. Overnight, chip and AI shares fell across Asia while Chinese equities moved higher. Deutsche Bank ↗ 0.49% strategists described the shift as "crudely a big rotation from data centres to everything else across the globe," according to a note summarized by FXStreet.fxstreet.com

On Wednesday, November 4, the S&P 500 ↘ 1.88% rose 1.58%, its best day since August, after Democrats won commanding victories in the races that decided control of the House and Senate, NBC News reported. The Dow Jones Industrial Average gained 1,569 points, or 3%, and the Nasdaq Composite climbed 1.4%, according to the AP. It was the S&P 500's second-largest one-day gain after a midterm election since 1982, CNN reported.nbcnews.com+2

Tech rebound proves fragile

The strategists said the midterms "seem no different" from past ones. Stocks rallied "whilst bond yields fell sharply around the world," and tech shares bounced despite fears of a fresh slump, FXStreet reported. They added that the uncertainty "accelerated overnight." Nasdaq futures fell, and South Korea's Kospi dropped sharply as SK hynix ↘ 6.95% and Samsung Electronics slumped.fxstreet.com

Two worries drove the selling. Weak results from Qualcomm ↘ 9.67% and Arm Holdings ↘ 5.28% revived doubts about chip-sector growth, and the Kospi's slide triggered a brief sell-side trading curb, Investing.com reported. Investors also worried that a Democratic Congress, along with Democrat Gina Hinojosa's win in the Texas governor's race, could bring tighter rules on data centers, according to Dow Jones via Morningstar. In Tokyo, Advantest and Tokyo Electron fell steeply, AFP reported, and the Nikkei 225 also declined.au.finance.yahoo.com+2

China outperforms on Beijing support

Chinese equities moved the other way. Deutsche Bank said the Hang Seng benefited from new Beijing support measures that lifted sentiment toward domestic chipmakers, according to FXStreet. Those measures included a 25-basis-point cut, to 1%, in the People's Bank of China's relending rate for share buybacks and purchases, Investing.com reported. Alibaba ↗ 4.91% and Tencent led gains in Hong Kong. The CSI 300 extended its rebound for a second day, the South China Morning Post reported.afp.com+3

Europe joins the rally

Europe also gained. The strategists noted that the STOXX 600 had its best day since June, Germany's DAX its best since April, and European banks their strongest session since April, FXStreet reported. Australia's S&P/ASX 200 rose on Thursday, helped by lower oil prices and a larger-than-expected trade surplus, according to LGT Private Banking.lgt.com+1

Investors now face the October US jobs report, due November 6. The Dow closed the rally still below its August record, Yahoo Finance noted.finance.yahoo.com