European stocks rise after Democrats win both chambers of Congress

Renewables stocks outperformed as the Democratic wave seen as supportive of companies in the clean energy supply chain

European stocks rose after Democrats including Senator-elect Abdul El-Sayed (pictured) won control of both chambers of Congress in the US midterms, with renewables stocks outperforming. Photographer: Sarah Rice/Bloomberg via Getty Images

European stocks rose after Democrats won control of both chambers of Congress in the US midterms, with renewables stocks outperforming.

The Stoxx Europe 600 was 0.5% higher at 8:16 a.m. in London. Wind farm operator Orsted A/S rose as much as 7.3% while Vestas Wind Systems A/S gained as much as 5.5%, with the Democratic wave seen as supportive of companies in the clean energy supply chain. European stocks were also boosted by gains for Novo Nordisk A/S, which rose as much as 6.6% after boosting its forecast.

A landslide win for Democrats amounted to a rejection of President Donald Trump following widespread voter discontent with the economy and the war in Iran. Treasuries rallied amid expectations that the new political environment may limit the Trump administration’s tax and spending plans.

European equities had outperformed the US market in the month leading up to the midterms amid a rotation out of the artificial intelligence trade and into more defensive sectors. Investors’ main focus now will be on the outlook for the Iran war and any policy changes that could impact the tech sector.

“The midterms and presidential elections are becoming more meaningful for us than they ever had been before” in Europe, said Michael Field, Morningstar’s chief equity strategist. “The whole split between Congress now and the president should inhibit any huge measures going forward, which I think is a good thing ultimately for the economy and a good thing for business.” 

European Stocks Narrowed Gap to US in Run Up to Midterms There are worries about the earnings outlook for stocks in AI-related sectors as some newly elected candidates have been vocal in their opposition to data centers. However, many investors have been front-running those risks by offloading stocks that stand to benefit most from the AI rollout, with a UBS Group AG basket tracking these names falling 11% last month.

Bank J Safra Sarasin equity strategist Wolf von Rotberg said the immediate negative market reaction to the Democrat landslide victory fed into concerns around the construction of data centers across the US. “Wins in states like Texas could slow the buildout and have a broader impact on AI capex, which could have consequences for the cycle as well,” he said.

He added that Trump conceding his party’s defeats removed a key concern that weeks of political turmoil could have followed. “Markets surely see that as relief.”

• Bloomberg