By Hideyuki Sano
TOKYO (Reuters) – Wall Street stock futures and Asian stocks erased most of their previous profits in harsh trading on Wednesday, as the results of the US mid-term showed Republicans close to losing their grip on Congress.
U.S. S & P500 futures
The congressional election is charged as a referendum on President Donald Trump's polarization style and "America First" policy.
Investor sentiment has been volatile in Asian trade of equities and the dollar revolves on the Republicans' fluctuated prospects to retain the House. By late in the morning, broadcasters projected the Democrats to turn the control over the house.
Asian stocks retained most of their profits but were of the highest quality with MSCI's broadest Asia Pacific Asia Index outside of Japan <.MIAPJ0000PUS> up 0.3 percent while Japan's Nikkei <.N225> increased by 1.2 percent.
Leaders in the election, investors expected the Democrats to have a majority in the House, and consequently remained skeptical of Trump's proposal by the end of the month on tax cuts for middle-income households.
Market participants had previously said a surprise. The household gains of the Republicans could increase the chances for further tax cuts and pro-business policies, while the victory of a democrat would probably already be priced.
In the US Senate War, the Republicans took an overthrow and set out a Democratic Commander in Indiana, which Democrats had difficulty in winning the House.
"The house's performance so far shows better than expected performance for the Republicans, even if they do not hold the house," said Steven Englander, global manager of G10 FX research at Standard Chartered Bank in New York.
"So it does not look like a big blue wave, and Republicans can do a bit better than expected in the Senate and the market reacts with a stronger dollar, higher US interest rates and higher US stocks," he said.
On the other hand, many investors also expect that Trump will continue to take a tough line on tariffs, which he can introduce without the Congress's approval. It is alive about a trade war between China and the United States.
Trump's huge tax cut, adopted in December, and a spending agreement reached in February helped boost the US economy, but they have also expanded the US federal budget deficit.
As a result, cash flow has increased, which increases US bond yields higher.
The 10-year US cash flow decreased by about 1 point to 3,193 percent
Oil prices were soft after 2 percent fell last day, with US raw futures that hit an eight-month low as Washington granted sanctions against top purchasers of Iranian oil and as Iran said it has so far been able to sell as much oil as it needs
US West Texas Intermediate (WTI) raw
Dollarn index <.DXY> recovered from early losses to trade slightly higher.
Against the yen, the US currency rose to a month high at 113.82 yen
Earlier, the sterling became three weeks long and extended the winnings on the hopes of a Brexit breakthrough after Brexit secretary Dominic Raab said "Thumbs Up" on his way out of a meeting in the cabinet.
It helped sterling to recover losses following remarks by a leading member of the Northern Irish Democratic Unionist Party, so it seemed that Britain would leave the EU without an agreement.
(Reporting by Hideyuki Sano in Tokyo, Further Reporting by Daniel Bases in New York, Editing Sam Holmes)