A decisive victory by the Democratic Party in the United States midterm elections has sparked fresh concerns over stricter regulations targeting the artificial intelligence industry, triggering a wave of selloffs that spread from global to Asian markets. Losses deepened on the stock exchanges in Japan and South Korea, while Taiwan’s benchmark index entered bear market territory. Efforts by financial authorities to stabilize markets in the region and a recovery in US index futures helped limit some of the declines in later trading.
Tech shares lead sharp falls in Asian markets
The MSCI Asia Pacific Index fell by 3.8%, with Japan’s Nikkei 225 index dropping 5.8%. This marked the steepest daily loss for the Nikkei since April 2025. In South Korea, the Kospi index suffered an intraday loss of 8.8%, activating a circuit breaker mechanism to temporarily halt trading. Leading South Korean tech stocks Samsung and SK Hynix each lost more than 5%. Meanwhile, Taiwan’s main index dropped 4.5%, sending it into bear market territory, which typically denotes a decline of 20% or more from recent highs.
Heavy selling was driven by fears that the Democrats’ congressional victory in the US could prompt tighter rules on data centers, potentially slowing growth in AI infrastructure. The Philadelphia Semiconductor Index lost around 16% this week, heading for its worst weekly performance since April 2025.
US President Donald Trump, responding to a steep downturn in technology and AI-related stocks, blamed Democrats for the losses suffered by Americans in their 401(k) retirement accounts. The Republican Party had faced widespread defeats during the midterm vote held on Tuesday.
South Korea takes action to stabilize trading
South Korean regulators temporarily scrapped the requirement for investors to maintain collateral worth at least 140% of margin transactions. This step aimed to restrict forced selloffs that might be triggered by brokerage firms during volatile market conditions. Taiwan’s financial regulator was also expected to announce measures to support market stability.
News of support initiatives and a rebound in US stock index futures helped Asian markets recover part of their losses. The Nasdaq 100 futures climbed 0.8% during the session.
These moves reflect the growing intervention by authorities in order to cushion rapid declines and prevent further destabilization of financial markets in the region.
Bond markets rally as investors seek safe havens
A flight to safety pushed investors toward government bonds. China’s 10-year government bond yield slid to an all-time low during the day, driven by ample liquidity and increased demand for low-risk assets. The central bank’s latest policy rate adjustment was widely interpreted as a form of monetary easing, reinforcing this trend.
US Treasury bonds maintained their gains from Thursday, while Japanese government bonds also advanced on Friday. The US dollar strengthened against all other G10 currencies as investors sought out safer assets amid market turbulence.
Oil prices recover but face historic weekly loss
Brent crude oil rose 1.4% to $99.70 per barrel after surging 3.9% in the previous session. Nonetheless, Brent remained on course for its steepest weekly loss since April 2020.
Throughout the week, oil prices were influenced by expectations about the possible end of long-running conflict in the Middle East. Initially, investors anticipated that the Democrats’ congressional win could accelerate efforts to resolve tensions with Iran. Later in the week, however, concerns about tighter data center regulations triggered widespread selling in technology stocks and increased volatility in energy markets.
Canada commits to investment-led growth via borrowing
Canadian Prime Minister Mark Carney reaffirmed his commitment to accelerating investments by leveraging the nation’s public balance sheet. The plan involves increasing government borrowing and channeling billions of dollars in higher tax revenues into measures aimed at expanding the country’s productive capacity.
The market impact of the US election results shifted quickly, as investor attention moved from hopes for an end to the Middle East war to the prospect that AI investments might slow due to regulatory headwinds. The nearly 16% weekly loss in semiconductor stocks highlighted this shift in sentiment. Although Asian measures helped ease some daily losses, Brent’s rebound in the final two sessions was not enough to prevent an historic weekly decline, exemplifying the turbulent conditions currently facing global commodity and equity markets.
