While Donald Trump's Republicans lost control of the House of Representatives, the result is unlikely to lead to a reversal of his popular tax cuts.

Hong Kong (AFP) - Asian markets fluctuated Wednesday after US midterm elections left the two houses of Congress split between Democrats and Republicans, paving the way for gridlock on Capitol Hill.

Donald Trump’s Republican party maintained its control of the Senate but the Democrats regained power in the House of Representatives, in line with forecasts.

But, while the vote saw Trump’s party lose overall power on Capitol Hill, analysts pointed out that the result is unlikely to lead to a reversal of the White House’s popular tax cuts and deregulation.

Nor will it wind in the president’s aggressive efforts to reframe international trade, which has been a key to recent volatility in global markets.

“Equities remain supported, suggesting this outcome is positive for risk since the gridlock outcome ultimately will support the president’s mandate and a higher probability of more fiscal stimulus,” said Stephen Innes, head of Asia-Pacific trading at OANDA.

“Realistically I can’t see how the Democrats would want to be perceived as killjoys and try to stifle any policy which is supporting the economy,” he added.

However, with control of the House, Democrats will likely look to prevent Trump pushing through his most divisive measures – gumming up the legislative process – while also looking to boost oversight of the White House.

Hong Kong lost its earlier gains to sit barely moved in late afternoon trade, while Shanghai ended 0.7 percent down and Tokyo shed 0.3 percent.

Sydney added 0.4 percent, with Singapore 0.3 percent up. There were also gains in Taipei and Wellington but Seoul lost 0.5 percent while Manila, Bangkok and Jakarta were also down.

On currency markets the dollar dipped against its major peers as well as higher-yielding and emerging market units, as a win for Republicans in both houses of Congress would likely have led to more tax cuts and regulatory measures.

- Brexit hopes -

The pound continued to rise as traders grew optimistic that officials are close to an agreement for a post-Brexit deal for Britain, with the question of Northern Ireland the main sticking point.

“With the smoke surrounding a possible Brexit deal thickening, the trading market looks justified in taking the view there must be a fire somewhere,” said Ray Attrill, head of forex strategy at National Australia Bank.

Energy firms dropped with oil prices on worries about an oversupply following a forecast-beating rise in US stockpiles, while the head of the International Energy Agency called on OPEC to boost output.

The comment from director Fatih Birol comes as Venezuela’s production dries up and US sanctions on Iran kick in.

However, the commodity was already depressed by news that Washington had given waivers to eight countries allowing them to continue buying crude from Tehran, tempering most of the embargo’s impact.

“At least three of the top five consumers of Iranian crude have been granted waivers. Therefore the impact is likely to be substantially muted,” Sukrit Vijayakar, founder of energy consultancy Trifecta Consultants, told AFP.

“Apparently, President Trump had a more important short-term goal of bringing oil prices down so as to help the re-election of Republican congressmen.”

Both main contracts are down about a fifth from their four-year highs touched at the start of last month.

- Key figures around 0710 GMT -

Tokyo - Nikkei 225: DOWN 0.3 percent at 22,085.80 (close)

Hong Kong - Hang Seng: FLAT at 26,127.62

Shanghai - Composite: DOWN 0.7 percent at 2,641.34 (close)

Euro/dollar: UP at $1.1435 from $1.1416 at 2120 GMT

Pound/dollar: UP at $1.3110 from $1.3097

Dollar/yen: DOWN at 113.19 yen from 113.46 yen

Oil - West Texas Intermediate: DOWN 49 cents at $61.72 per barrel

Oil - Brent Crude: DOWN 43 cents at $71.70 per barrel

New York - Dow: UP 0.7 percent at 25,635.01 (close)

London - FTSE 100: DOWN 0.9 percent at 7,040.68 (close)