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European Stocks Rally as Banks and Clean Energy Lead After US Midterm Sweep

France's CAC 40 rose 1.54 percent to 8,143.57 and the Euro Stoxx 50 gained 1.88 percent to 6,260.36 on Wednesday, as investors bought banks and clean energy shares after Democrats won control of both chambers of the US Congress.

By Orbit Post2 min read
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European Stocks Rally as Banks and Clean Energy Lead After US Midterm Sweep

Key points

  • European stocks climbed on Wednesday, November 4, as buyers returned after a rough overnight start.
  • The session did not start this way.
  • Banks did much of the heavy lifting.

European stocks climbed on Wednesday, November 4, as buyers returned after a rough overnight start. France's CAC 40 rose 1.54 percent to 8,143.57, up from 8,020.31 at the previous close. The Euro Stoxx 50, which tracks large companies across the euro zone, gained 1.88 percent to 6,260.36, up from 6,144.56. Reuters reported that the wider Stoxx 600 index advanced nearly 1 percent by mid-morning in London.

A fast reversal

The session did not start this way. Stoxx futures fell as much as 1.4 percent early on Wednesday, and US stock futures dropped as much as 2 percent overnight, Reuters reported. The mood turned after results confirmed that Democrats had won control of both the Senate and the House of Representatives in Tuesday's US midterm elections. By the European morning, US futures had moved back into positive ground and European shares followed them higher.

Banks and clean energy led

Banks did much of the heavy lifting. Reuters said the Euro Stoxx banks index was the top performing sector, up nearly 4 percent, as investors bought domestically focused lenders in Italy and Spain that have trailed the wider market for much of the year. Bank benchmarks in Italy rose 2.2 percent and in Spain 1.6 percent.

Clean energy shares rose even faster. Vestas gained 4 percent, Orsted rose 6.7 percent and Nordex added 5.3 percent, Reuters reported. Those stocks had taken the hardest hits from President Donald Trump's energy policies, and traders bought them back once the election result was clear.

Drugmaker Novo Nordisk also helped. Its shares advanced 4.2 percent after the company reported third quarter adjusted operating profit above expectations and raised its full year sales and profit forecasts, Reuters said. A separate dpa-AFX report carried by TradingView pointed to the same mix behind the rise: a run of solid company earnings, steadier oil prices and lower bond yields.

What happens next

The rally now faces a test on Wall Street. Reuters noted that the Democratic sweep has raised fears that fast growth in artificial intelligence could face tighter regulatory scrutiny, which is why tech shares lagged the rebound even as banks and energy names climbed. Traders in Europe were also waiting on euro zone inflation data due on Wednesday. If US stocks hold their early gains, European markets are likely to keep most of Wednesday's rise into the close. If tech selling returns in New York, the banks and clean energy names that led Europe higher will show whether buyers meant it or were just covering short positions.

Sources