Democrats' Sweep Sparks Dow's Best Day in 18 Months

Wall Street surged on Wednesday, with the Dow posting its best day in a year and a half, after Democrats swept both chambers of Congress. The FTSE 100 notched its strongest gain since May as UK banks rallied ahead of Thursday's Bank of England rate decision. Oil and the dollar tumbled as markets bet the new political gridlock will hasten an end to the US-Iran war. 

Equities 

The FTSE 100 closed about 1.8% higher on Wednesday at 10,829 points, its biggest one-day percentage gain since May, as investors welcomed Democrats' sweep of both chambers of the US Congress. The midcap FTSE 250 added 0.98% to a two-month high. UK banks led the rally ahead of Thursday's Bank of England rate decision. 

HSBC, Lloyds Banking Group, Barclays and Standard Chartered all rose, with HSBC the strongest gainer, as investors bet a widely expected rate rise would boost banks' net interest income. Metro Bank jumped around 17% after reaffirming its full-year forecasts. Marks & Spencer climbed after stronger-than-expected first-half sales, while Smith & Nephew rose despite trimming its full-year guidance. 

BAE Systems fell as investors weighed a tougher path through a Democrat-controlled Congress for Washington's defence budget plans. Shell and BP also slipped as crude prices tumbled on reduced expectations of further US strikes on Iran. Weir Group dropped after flagging near-term headwinds from the Middle East conflict and disruption at its Chilean mines, despite keeping its annual outlook unchanged. 

Wall Street closed sharply higher on Wednesday, with the Dow Jones Industrial Average jumping 3% to 53,356.12 points, its best one-day gain in roughly a year and a half. The S&P 500 added 1.6% to 7,688.62, while the Nasdaq Composite rose 1.4% to 25,736.51. Stocks rallied as the Democrats' sweeping win eased political uncertainty and a sharp drop in oil prices boosted risk appetite. 

Microsoft, Amazon and Alphabet all climbed on bets that slower AI infrastructure spending would favour cash-rich technology giants over smaller rivals. AMD rose after forecasting faster-than-expected 2027 growth on surging data-centre chip sales. Chipmakers fell broadly to a six-month low, led by Nvidia, Micron and Intel, on fears a Democrat-controlled Congress will slow the AI buildout. 

Data-centre operators including Hut 8 and IREN tumbled after Democrats made gains in Texas and Georgia, states central to the sector's expansion, stoking fears of tougher regulation. SpaceX and Tesla fell after Elon Musk spent heavily backing Republican candidates in Texas, home to both companies. Defence contractors Northrop Grumman, RTX and Lockheed Martin also slipped, while solar and clean-energy stocks rose on bets Democrats will preserve federal green-energy support. 

Forex & Commodities 

The dollar index fell to 101.25, its lowest level since September 30, down about 0.2% on Thursday after a 0.3% slide on Wednesday, as markets weighed the implications of a Democrat-controlled Congress for trade and fiscal policy. US Treasury yields also eased, with the 10-year note falling to its lowest level since mid-September, ahead of Thursday's weekly jobless claims data. 

Sterling rose for a seventh straight session to a seven-week high near $1.35, with investors awaiting Thursday's Bank of England decision. The BoE is widely expected to raise its key rate by a quarter point to 4%, its first increase in three years, to tackle inflation pressure from this year's rise in energy costs. The euro also firmed against the dollar, trading near its strongest level since early October. 

Gold climbed to a two-week high above $4,100 an ounce, up around 1.6% on Thursday after jumping roughly 3.4% on Wednesday, its best day since August. The rally was driven by the softer dollar and falling Treasury yields following the US election result, with one bank setting a price target of $4,500 an ounce over the next few months. Silver and platinum also edged higher. 

Brent crude tumbled almost 9% overnight to below $100 a barrel and was testing two-month lows near $94 on Thursday, putting it on track for its steepest weekly drop since 2020. The slide reflected bets that a weakened Trump administration will be less likely to escalate the US-Israeli war with Iran, a conflict that has driven energy prices and inflation higher for much of this year.