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Wall Street to drop as market reacts negatively to US midterm elections

09 November 2018 06:04 AM  Company: []
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JAKARTA. Wall Street will open lower in today's trading. Dow Jones futures contracts imply a decline of 12 points at the opening, while the S&P 500 and Nasdaq are implied by 8 and 32 points respectively.

Midterm elections seem to be responded negatively by market participants. The Democratic Party is now in control of the House of Representatives, while the Republicans have retained their control in the Senate.

With the House controlled by the Democrats, pro-economic growth policies such as cutting tax rates will be difficult to pass, according to cnbcIndonesia.com review.

For information, about two weeks before the midterm elections, US President Donald Trump announced the discourse to cut income tax for middle-class individuals by 10%.

Furthermore, if Mr Trump tries to boost the economy through illegal spending, this move is likely to be blocked by the Democrats due to the country's high budget deficit.

In the 2018 fiscal year, the budget deficit in the US was US$ 729 billion, up 17% from the position of the 2017 fiscal year and the largest since 2012.

On Wednesday (7/11) Mr Trump and House Minority Leader Nancy Pelosi insisted that they could work together in fields such as infrastructure spending and health insurance.

However, the continuation of this is still a big question mark, considering that the Democrats might investigate various issues that are closely related to Mr Trump, such as Russia's involvement in the 2016 US presidential election, insider trading involving the president's inner circle, and Mr Trump's tax returns.

Mr Trump has also reminded that the Democrats can choose to work together on various problems or conduct investigations related to their government, but they cannot do both.

"If that happens then we will do the same thing and the government will stop," Mr Trump said at a press conference, as quoted by The Washington Times.

At 8:30 p.m. WIB, unemployment claims for the week ending November 3 will be announced.

At 02:00 WIB (9/11), the Federal Reserve is scheduled to announce its decision regarding the benchmark interest rate. Market participants estimate that the benchmark interest rate will not be changed at this meeting.

However, market participants will look at statements from the Fed to look for clues about whether or not the benchmark interest rate rose in December. (AM/MS)