US elections, AI collapse, and volatile oil: markets between euphoria and fear

International financial markets have experienced extraordinary volatility, marked by the Democratic victory in the US elections, the sharp correction in the technology sector, and the return of inflationary pressures. Between hopes of geopolitical easing and fears of further monetary tightening, investors rapidly adjusted their strategies, causing sharp swings in stocks, commodities, bonds, and currencies.

The Democratic victory changes the global balance

The US midterm elections handed Democrats control of the House and Senate, inflicting a heavy political defeat on President Donald Trump. The result, fueled by discontent over rising living costs and the prolongation of the war against Iran, immediately altered investor expectations.

The prospect of a Congress hostile to the White House could limit some of the administration's fiscal and trade initiatives, fostering greater legislative predictability. At the same time, the new majority could push for a diplomatic solution to the Middle East conflict, although Trump retains broad powers in foreign policy.

Initial reactions were positive: the Dow Jones gained around 3%, supported by expectations of less political instability and the rapid reduction in energy prices.

However, the very political shift in America has opened a new front of uncertainty for one of the main drivers of global financial growth: artificial intelligence.

Artificial intelligence drags Wall Street into correction

The tech sector has undergone a sudden turnaround. The possibility that the new Congress will intensify regulation of artificial intelligence, slowing data center construction, has prompted massive sell-offs in companies most exposed to this expansion.

The Nasdaq posted a daily loss of 5.52%, while the S&P 500 saw approximately $3 trillion in market capitalization evaporate. Semiconductors were particularly hard hit, with Nvidia and other digital infrastructure companies at the center of liquidations.

The correction doesn't necessarily represent a reduction in the potential of artificial intelligence, but it does highlight investors' doubts about the sustainability of valuations and the enormous amount of capital needed to finance the sector.

The subsequent partial recovery in technology stocks demonstrated that structural interest in AI remains significant. However, the market now appears more selective, favoring companies capable of turning technology investments into tangible profits.

Europe and Asia: From Sector Rotation to General Sales

In Europe, the initial reaction was favorable to traditional sectors. The STOXX 600 gained 1.82%, while European banks rose 4.6%, benefiting from capital rotation toward companies less dependent on AI expectations.

However, optimism quickly faded. The American tech crash spread to European markets, penalizing semiconductors, industrials, and insurance. Munich Re, Hannover Re, and Swiss Re also suffered from analysts' more conservative assessments of the reinsurance sector.

The impact was even more severe in Asia, where semiconductor production is a key component of regional economies. South Korea's KOSPI lost about 6% in one session, while Japan and Taiwan saw sharp sell-offs.

Asia’s vulnerability highlights how global industrial growth is now closely linked to demand for digital infrastructure.

Inflation and employment complicate central bank decisions

On the macroeconomic front, the American labor market showed greater resilience than expected, with 165,000 new jobs and unemployment falling to 4.1%.

These results strengthened expectations of further tightening by the Federal Reserve, bringing the implied probability of a December hike close to 80%.

The solidity of the US economy is therefore an ambivalent factor: it supports consumption and corporate profits, but reduces the scope for monetary easing. Furthermore, the prospect of high interest rates continues to penalize the most indebted companies, especially those engaged in particularly costly technology investments.

In Europe, inflation has reached 4%, fueled largely by rising energy prices. Christine Lagarde confirmed that the ECB will carefully evaluate upcoming indicators before deciding on a possible further rate hike.

The Bank of England has already acted, raising its key interest rate to 4% in an attempt to contain persistent price pressures.

Oil: The Iranian conflict continues to dictate prices

The energy market showed particularly wild swings. Expectations of a possible easing of tensions between the United States and Iran initially pushed Brent crude up to $94.62 a barrel, erasing part of the geopolitical premium accumulated during the conflict.

The subsequent resurgence of tensions along the Gulf shipping lanes, however, brought crude oil back to $98.29, demonstrating how sensitive the market remains to military and diplomatic news.

A negotiated peace could help restore international energy flows, alleviating inflationary pressures and, above all, supporting importing economies. However, attacks on oil tankers and the lack of security guarantees in the Strait of Hormuz make normalization impossible to consider imminent.

Gold, Industrial Metals, and the Dollar: New Divergences

Gold initially benefited from the weakness of the dollar, falling bond yields, and the search for financial protection, reaching a high near $4,146 an ounce.

Subsequently, strengthening expectations of a US rate hike caused a retracement towards $4,074. However, the precious metal retained much of its weekly gains, confirming its role as a portfolio diversifier.

Industrial metals fared differently. Copper lost about 2.7% over the week, weighed down by fears of lower data center investment and a more uncertain outlook for manufacturing demand. Aluminum and zinc also suffered from reduced risk appetite.

On the currency market, the dollar initially suffered from the American political upheaval, but then quickly recovered thanks to solid employment and expectations of a more restrictive Fed, with a daily increase of 0.77%.

Outlook: increasingly selective global growth

The week has shown how financial balances are today conditioned by the interaction between geopolitics, monetary policy, and technological investments.

Potential easing of tensions in the Middle East could reduce energy costs, while artificial intelligence retains significant structural growth potential. However, persistent inflation, costly financing, and regulatory uncertainty require greater caution.

The market isn't necessarily abandoning growth: it's starting to distinguish more sharply between future expectations and actual economic value.