Wall Street spent Wednesday celebrating a Democratic midterm sweep as if the hard part was over. The Dow jumped more than 3 per cent, the VIX was crushed and oil collapsed on hopes that divided government and quieter Gulf diplomacy would cool the inflation story. Asia’s answer overnight was more complicated: Hong Kong and Australia joined the party, while South Korea’s chip-heavy market sank almost 5 per cent and Nasdaq futures slipped nearly 1 per cent into Thursday. For London, the real dial today is Threadneedle Street, where the Bank of England is widely expected to deliver its first rate rise since August 2023.
The 60-Second Market View
Wednesday’s US close was emphatic. The Dow rose 3.03 per cent to 53,356.12, the S&P 500 gained 1.58 per cent to 7,688.62 and the Nasdaq Composite advanced 1.44 per cent to 25,736.51. The VIX plunged 20.26 per cent to 16.61. In London the FTSE 100 climbed 1.79 per cent to 10,829.21, while the German DAX finished unchanged at 26,437.67.
Overnight the tape is less tidy. S&P futures are little changed at 7,706.50, down 0.18 per cent, but Nasdaq 100 futures are off 0.91 per cent at 28,307.25, while Dow futures are up 0.31 per cent. Brent is near $93.92 after Wednesday’s roughly 8 to 9 per cent crash, WTI around $86.97, and gold has ripped to about $4,150.70. The dollar is softer at 101.25, sterling near $1.3489 and US 10-year yields about 4.84 per cent.
What Happened Overnight?
Asia split cleanly. Hong Kong’s Hang Seng jumped 3.09 per cent to 24,659.03 and Australia’s ASX 200 rose 2.36 per cent to 9,043.20, with India’s Nifty up 1.70 per cent and Shanghai barely changed. On the other side, South Korea’s KOSPI slumped 4.63 per cent to 5,420.77 after regulators moved to cool a frantic AI-linked rally, with trading sidecars triggered as chip names led the fall. Japan’s Nikkei lost 1.42 per cent to 61,306.77 and Taiwan dropped 2.54 per cent to 41,856.61. SoftBank was roughly 6 per cent lower as Arm shares slid and the Financial Times reported that China is blocking SoftBank’s planned $5.4 billion purchase of ABB’s robotics business.
The Big Story: Oil’s Crash Hands the BoE a Gift and a Puzzle
The midterm map is clearer on day two. Markets spent Wednesday pricing a Congress that can frustrate the White House: less fiscal fireworks, more gridlock, and fewer easy paths for sweeping tax cuts. That helped crush volatility and lift banks and industrials. The louder move was in commodities. Brent’s collapse from above $100 towards the mid-nineties rewrote the near-term inflation maths overnight.
For the Bank of England that is both helpful and awkward. A Reuters poll has pointed to a 25 basis point rise in Bank Rate to 4.00 per cent, with most economists expecting a hike and only a thin minority a hold. The decision lands at 12:00 GMT, with Governor Andrew Bailey’s press conference at 12:30. Oil falling this fast softens imported inflation and gives the committee more cover if it wants to sound less hawkish. It also complicates the message: hike because domestic services inflation and wage stickiness still look too warm, or pause because the energy shock has just eased?
Markets may cheer the hike if Bailey frames it as the last of a short cycle, and punish sterling if the minutes sound more open-ended. Gilts already sit near 5.16 per cent on the 10-year, so the vote split will move the pound and UK banks quickly. Asia’s chip sell-off also shows how fast an AI narrative can flip when regulators intervene. Unverified overnight claims around tanker and mine activity in the Strait of Hormuz have not reversed the oil decline; the market is still leaning towards diplomacy over disruption.
FX
The dollar is softer at 101.25 on the ICE index, down 0.31 per cent, which fits the lower-yield, lower-oil mood. Sterling is a touch firmer at $1.3489 ahead of the Bank decision, while the euro trades near $1.1261. The yen has strengthened to about 157.93 per dollar. Against the euro, sterling is around 0.8346, so today’s pound story is less about Europe and more about what Bailey says after the vote.
Equities
US futures show the hangover: Nasdaq under pressure after Asia’s chip session, the Dow still bid, and the S&P roughly flat. The midterm cheer is intact for the broader tape; the AI trade is still fragile. In Europe, watch semiconductor equipment names for follow-through from Korea and Taiwan. The FTSE 100 starts from a strong Wednesday close, but energy’s weight means cheaper oil is a headwind even if banks like a firmer rate path. Bitcoin is modestly higher near $80,450, tracking risk assets rather than gold.
Bonds
US 10-year yields are near 4.843 per cent, roughly five basis points lower, and the two-year is around 4.556 per cent. That easing sits with softer oil, a weaker dollar and a market that thinks gridlock reduces the chance of a big fiscal surge. UK 10-year gilts finished near 5.1615 per cent and will take their cue from the Bank Rate decision and Bailey’s tone. If the committee hikes but sounds ready to wait and see, front-end yields can fall even as the policy rate rises.
Commodities
Oil remains the centrepiece. Brent at $93.92 and WTI at $86.97 keep sliding after Wednesday’s crash, leaving the week sharply lower and handing inflation-watchers a clearer disinflation impulse. Gold’s surge to $4,150.70 on the futures contract, with spot near $4,139, shows investors still want a hedge while yields and the dollar ease. Silver is firm around $53.14.
Today’s Economic Calendar
09:30 GMT — UK Construction PMI. Why traders should care: a quick read on whether Britain’s building sector is still cooling before the Bank decision.
12:00 GMT — Bank of England Bank Rate decision, minutes and MPC vote. Why traders should care: the first expected hike since August 2023, and the vote split will set sterling and gilt tone for the rest of the week.
12:30 GMT — Governor Bailey press conference. Why traders should care: the wording on oil, wages and how far the committee is prepared to go matters more than the 25 basis points themselves.
Levels Traders Are Watching
These are reference points, not predictions. On the S&P 500, 7,700 is the round number sitting just under futures. For Nasdaq 100 futures, whether 28,300 holds after Asia’s chip sell-off is the near-term test. On the FTSE 100, 10,800 is the marker after Wednesday’s bounce. Sterling around $1.35 is the line into the Bank decision. Gold near $4,150 is the fresh high traders will lean on, and for Brent, $95 then $90 are the zones that tell you whether the crash is consolidating or still running.
Where This Leaves Us
The cleaner read is that Wednesday priced political relief and cheaper energy, while Asia overnight priced regulatory risk inside the AI trade. Those can sit together for a while: broader US equities can stay supported even as chip-heavy markets chop. The oil collapse is the more important second-order shift for London today, because it changes the inflation path the Bank of England has to talk about at noon.
That view would change if the committee surprises with a hold, if the minutes sound far more hawkish than a one-and-done hike, if oil reverses on Gulf supply headlines, or if Nasdaq futures break lower and drag the wider tape with them. Watch Bank Rate and the Bailey presser, sterling, gilts, Brent and gold. Day-two midterm moves often sort winners from noise once the first cheer fades; the risk is treating cheaper oil as permanent when geopolitics can still flip the barrel price. For beginners, the lesson is that the same news can lift one market and punish another, depending on what was already crowded.
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