European shares are powering ahead! The FTSE 100 index in London has surged 207 points to 10,845, a near-2% gain.

The Dax in Frankfurt is up by a similar amount, while the French and Italian markets have jumped more than 2% and the Spanish index has soared 3.2%.

The pan-European Stoxx 66 has gained 1.8%.

Banking and clean energy stocks were among the top gainers, while defence stocks fell sharply both sides of the Atlantic (including in US pre-market trading), as Trump’s $1.5 trillion budget request for the Pentagon is likely to face far more scrutiny in Congress. The UK’s BAE Systems, which relies on the US for almost half its revenues, fell almost 6% earlier and is now down nearly 2%.

Wall Street is expected to open higher in less than half an hour, after Democrats secured sweeping victories in the midterm elections and secured control of US Congress Investors are hoping that it will be able to limit Donald Trump’s scope for abrupt policy shifts, and keep a lid on government spending and borrowing.

The yield, or interest rate on the benchmark 10-year UK gilt is down 6 basis points at 5.18%, while the corresponding US Treasury yield has fallen 5.1bps to 4.91%.

Oil prices are down sharply, easing inflation fears, with Brent crude falling towards $100 a barrel. It is currently trading $2.72 a barrel lower at $100.87 a barrel, a 2.67% decline, as markets await Washington’s next move against Iran.

Eurozone yields nudged higher after inflation in the eurozone hit 4% last month, the highest in three years, and up from 3.8% in September.

The core inflation figure, which strips out volatile food and energy prices, remained at 2.5%, also in line with economists’ expectations, according to the flash estimate from the eurozone’s statistics office Eurostat.

The dollar slid 0.5% against a basket of major currencies, driven by expectations of more regulation of the booming AI sector, which could lead to slower economic growth.

Spot gold, seen as a safe haven investment, jumped 2.9% to $4,041 an ounce.

On Wall Street and in Europe, stocks are powering ahead after Democrats won control of US Congress. The Dow Jones gained 2.5%, the benchmark S&P 500 rose 1.5% and the tech-heavy Nasdaq climbed 2.5% (overnight, stock futures initially fell sharply but quickly reversed those losses).

You can follow the latest midterm election news here:

Big technology companies such as Amazon and Google owner Alphabet have jumped while shares in Elon Musk’s Tesla and SpaceX slid. Musk spent nearly half a billion dollars backing Republican candidates, including in Texas, the home state of both companies.

AI stocks such as CoreWeave and datacentre operators tanked on the prospect of tighter regulation of the sector.

The FTSE 100 index in London climbed more than 200 points to 10,845, a near 2% gain. The pan-European Stoxx 600 was also up 1.96%.

US, UK and eurozone government bonds rallied, pushing yields lower. The yield, or interest rate, on the benchmark 10-year US Treasury fell 4.6 basis points to 4.90%.

The yield on the 10-year UK gilt slid 8.7 basis points 5.15% while that on equivalent Italian bonds dropped 9.5bps to 4.36%, and the German yield, the benchmark for the eurozone, slipped 2bps to 3.29% – indicating easing borrowing costs for governments.

The dollar has pared losses and is now down 0.35% against other major currencies, after sliding 0.6% to a one-month low overnight.

Spot gold jumped 3% to $4,047 an ounce. In oil markets, Brent crude fell towards $100 a barrel, losing more than $3 a barrel, or 3%, at one stage. It is now down 2.7% at $100.83 a barrel, as as investors await Washington’s next move against Iran.

We are wrapping up for the day. We’ll be back tomorrow. Thank you for reading. Take care! – JK

Tesla, SpaceX and datacentre shares fall sharply along with defence stocks, while big tech stocks rise

Several big technology stocks rose: Amazon jumped 7.7%, Facebook and Instagram parent Meta Platforms rose 2.6% and Google owner Alphabet climbed 5.4%.

However, Elon Musk-led Tesla and SpaceX dropped 2.5% and 0.6% respectively. Musk spent nearly half a billion dollars backing Republican candidates, including in Texas, the home state of both companies.

Cloud computer company CoreWeave slid 4.8%. Datacentre operators IREN plunged 9.6%, Hut 8 slumped 15.7%, Applied Digital Corporation lost 4.8% and Core Scientific slid 10.8%.

The AI trade will be in focus for a while, after Democrats won governorship races in key datacentre states Texas and Georgia, where public opposition to sprawling, enegy-hungry datacentres has been growing. The new governor of Texas, Gina Hinojosa, has repeatedly called for a moratorium on new datacentres.

Among chipmakers, shares in Advanced Micro Devices rose 1.4% after it forecast faster than expected growth next year.

Defence stocks have taken a hit on both sides of the Atlantic as Donald Trump’s $1.5 trillion Pentagon budget request now faces a bumpy ride through US Congress. US stocks Northrop Grumman, RTX Corporation and Lockheed Martin fell 3.5%, 3.6% and 5.1% respectively. In London, BAE Systems is down 2.5%.

The dollar has pared losses and is now down 0.3% against other major currencies, after sliding 0.6% to a one-month low overnight.

Rachel Winter, partner at Killik & Co, says

The market is experiencing a sizeable post-election bump, thanks to the removal of the pre-election uncertainty and the fact that Donald Trump has not contested the result. Ordinarily, a divided government is preferable for the markets, as the associated gridlock makes big legislative changes less likely. However, while the Democrats have won control of both the House and the Senate, Trump is now referring to himself as ‘Mr Veto’, which implies that a state of legislative gridlock will likely endure for the remainder of his presidential term.

The past few trading sessions have been characterised by a rotation out of tech and into other sectors as the Democrats advanced in the polls. Several polls have indicated that Democratic voters are more likely to oppose data centres, and new Democratic senators have been elected following campaigns that focused on greater restrictions on data centre construction. This is potential a problem for a variety of companies in this space, most notably CoreWeave, Oracle, SpaceX and Tesla.

Texas had accounted for over a quarter of planned data centre capacity, and some of this could now be at risk, particularly for Elon Musk, who selected Texas as the home of his business empire. With the new Texas Democrat James Talarico now in the driving seat, backed by a campaign platform supporting greater data centre regulation, all eyes will be on his next move.

Democratic control of Congress will make further conflict with Iran more difficult, which has likely driven the drop in Brent crude, as the world hopes for an easing of oil supply concerns. This should also be helpful in terms of bringing down inflation. With a prolonged conflict now harder to maintain, defence spending is less likely to rise, which has put both BAE and Northrop Grumman in negative territory.

Wall Street opens higher after Democrats secure Congress

Wall Street has surged at the open, after Democrats scored historic victories in midterm elections and secured control of US Congress.

The Dow Jones rose 2%, while the tech-heavy Nasdaq and the benchmark S&P 500 both gained more than 1%. That’s quite a reversal: Overnight, stock futures fell sharply as investors worried about the prospect of tougher regulation of the AI sector and the impact on economic growth.

However, Michael Heydt, senior vice president and sector lead of global sovereign ratings at Morningstar, voices a note of caution.

The central consequence of Democratic control of Congress is likely to be gridlock rather than sweeping policy change. While Democrats may seek to advance healthcare, oversight, and affordability priorities, substantial legislative action will remain constrained by Senate procedures and presidential veto authority.

As a result, investors should focus less on major tax or spending shifts and more on the risks associated with government funding negotiations, debt ceiling debates, congressional investigations, and confirmation battles.

Although targeted bipartisan cooperation remains possible in areas such as permitting reform, energy infrastructure, and AI regulation, the next two years are more likely to be defined by institutional confrontation and political positioning ahead of the 2028 election cycle.

Ion Jauregui, market analyst from the UK-based brokerage ActivTrades, says the sharp decline in Nasdaq futures earlier was an overreaction, but they have since recovered strongly.

Although we know that having a Democrat-run congress will increase the likelihood of increased scrutiny for AI, data centres and increased investment into technology, this does not mean that there will be a significant reduction in spending. Big tech companies will be concerned about their valuations. People are beginning to question just how much they are investing in AI and how long until they see returns. Adding regulation concerns into the mix, this looks more like a re-rating.

Big tech stocks, AI infrastructure, datacentre developers and some of the semiconductors are likely to be the most vulnerable to a Democratic Congress. Cryptocurrencies and some financial stocks are also likely to face a more difficult regulatory environment. Renewable Energy, Utility and clean energy investment companies may see benefits from the positive political environment. Healthcare is likely to be more of a mixed bag due to the impact of regulation on drug pricing and insurance.

European clean energy and bank stocks have rallied on the result. However, for now, I would say that it is mostly a repositioning. Clean energy stocks are seeing benefits from the more positive political environment. European banks are also seeing benefits from increased risk appetite. However, this is based on expectations. To make this sustainable, we will need to see if there are real changes to fiscal, energy or regulatory policies due to the new political landscape in Washington.

Turning to the pound, which has gained 0.6% against the dollar to $1.3492 today, he said:

Sterling has gained significantly vs the dollar, nearing $1.35. This is largely due to the weaker dollar and lower US Treasury yields. However, interest rates in the UK will still be driven by domestic inflation and Bank of England policy.

In terms of trade, having a Democrat-run Congress may limit further expansion in US fiscal policy but is unlikely to have a quick impact on the general protectionist approach.

George Saravelos, global head of currency research at Deutsche Bank, has sent us his thoughts on the midterm elections.

1. Risk positive. We agree with the rebound in global equities and risky currencies overnight. The combination of a large Democratic majority in Congress and president Trump’s statement that he is willing to work with the opposition should act as a break on extreme policy outcomes and bring down risk premia. The market is increasingly likely to interpret surprising policy shifts from the executive as time-bound by the next presidential election or the new domestic political configuration.

2. No news is good news on Iran. Over the last 48 hours, president Trump stated that no attack on Iran is imminent and has acknowledged that the Iran war drove part of the election outcome. We have been writing that with oil flows through the Middle East having materially recovered, the market is pricing a large imminent risk premium of re-escalation and energy supply disruption. There is therefore negative time decay on the oil price, the more escalation is delayed, the bigger the downward pressure on oil.

3. All about the debt ceiling (and AI) now. The single biggest source of domestic policy uncertainty remaining in the US is the debt ceiling that will become binding by Q2 of next year. It is reported that Republicans aim to pass a debt ceiling increase via reconciliation over the next few weeks. If this succeeds, it will remove one additional layer of uncertainty on fiscal policy, while also preventing AI and other policy matters from getting bundled up in a protracted negotiation with a Democratic Congress. Irrespectively, question marks around the build-out of AI will likely persist.

On balance, we see political developments overnight as supportive of a continued bottoming out in euro-dollar: lower energy and global policy risk premium but higher AI implementation risks should on balance weaken the dollar. If Congress fails passing a debt ceiling increase this year, we would consider it an added dollar negative.

Sterling has hit a seven-week high against the dollar, which weakened across the board following the mid-term election results.

The pound climbed 0.6% to $1.3495 earlier and is now up 0.5% at $1.3483. It also firmed slightly against the euro, to 83.43 pence.

Sterling is also underpinned by expectations of interest rate hikes from the Bank of England, which is expected to raise borrowing costs from 3.75% to 4% at its meeting tomorrow. Higher rates usually boost a currency because they lead to be better returns for investors.

Markets are expecting three more quarter-point rate hikes in the coming 12 months.

This means more than 2.3m UK households face a sharp rise in mortgage payments as they come off fixed-rate deals next year.

Cryptocurrencies initially fell but then recovered, after the Democrats won control of both houses of ⁠the US Congress in the ⁠midterm elections – seen as a potential ​blow to an industry that has sought faster deregulation for digital assets.

While Donald Trump has been championing reduced regulation, some Democrats have also backed a light-touch ⁠approach.

The crypto sector spent more than $300m backing crypto-friendly Democrat and Republican politicians during the current and previous election cycles, according to Reuters.

Bitcoin, the world’s best-known cryptocurrency, briefly touched a six-week low before recovering to trade 0.8% higher on the ⁠day at $78,460. This came after a reversal in the stock market, where US index futures were up 0.3%, having fallen as much ​as 2% at one point overnight. Ether gained 1.4% to trade ‌at $2,323.

Bitcoin has fallen around 41% ‌since reaching record highs above $122,000 in October 2025, taking the value of the broader crypto market to about $2.6 trillion, according to CoinMarketCap.

Arun Pillai-Essex, principal geopolitical analyst at the risk intelligence company Verisk Maplecroft, has looked at the impact on US trade policy.

He argues the US midterms point to a significant shift in the political landscape, with implications extending well beyond Washington. This is particularly the case for key trading partners and emerging markets in Asia, where US trade and technology policy has an outsized impact on investment and economic growth.

With affordability dominating the midterm debate, we expect growing bipartisan pressure for tariff relief, particularly from lawmakers representing agricultural states and areas with strong trade ties to Canada. We’ve already seen selective exemptions on Canadian imports ahead of the elections.

We expect Congress to become more assertive on trade policy, challenging tariffs through disapproval resolutions and greater oversight. While presidential veto powers limit their direct impact, growing bipartisan opposition could raise the political costs of further escalation.

However, we don’t expect a fundamental shift in the White House approach. Tariffs remain an important bargaining tool, and further duties targeting manufacturing overcapacity across 16 major economies remain likely, adding another layer of restrictions following the forced labour tariffs imposed earlier this year.

The proposed overcapacity tariffs have a significant focus on Southeast Asia and the wider APAC region, adding to the trade pressures already facing regional exporters. A divided Washington is unlikely to offer much relief, with protectionist headwinds continuing to complicate trade and investment decisions across the region.

Overall, we expect the broader tariff framework to remain largely intact, but with greater scope for selective exemptions and negotiated concessions, while the White House keeps the threat of further escalation on the table.

Datacentre opposition cuts across party lines, driven by concerns over electricity, water and other local impacts. We’re already seeing this translate into state-level action, with New York and Texas moving to restrict new developments and growing scrutiny over who ultimately foots the bill.

In a divided Washington, these concerns are likely to gain further political traction, particularly as both parties look to capitalise on public unease around AI. The debate over datacentres is increasingly feeding into a wider debate about the pace of AI adoption and its economic and social costs.

However, we don’t expect the growing political backlash to significantly slow AI investment. Instead, developers are likely to face greater pressure to shoulder infrastructure costs, alongside tighter conditions on new projects.

But the underlying tension isn’t going away. Washington wants to accelerate AI investment to maintain its technological lead, while state and local governments face growing pressure to protect households from high costs.

At the federal level, a divided government will sharpen tensions with Congress and the White House over US tech policy. Two areas to watch closely are advanced semiconductor export controls and restrictions on outbound US investment into sensitive technologies.

The central tension over semiconductor exports is between Congress pushing for tighter, legally binding restrictions and a White House seeking to preserve flexibility to negotiate, selectively ease controls and protect US commercial interests.