World shares advance as Democrats' victory eases political uncertainty

NEW YORK/LONDON - Global stocks rallied on Wednesday after Democrats seized control of both chambers of Congress in the US midterm elections, providing greater political clarity and reducing uncertainty that has weighed on markets.

In a major setback to President Donald Trump, Democrats scored sweeping victories in Republican strongholds for the first time in generations. The breadth of the party's success was underscored by gains in districts long considered safely conservative, highlighting a political shift that may have caught some investors off guard.

On Wall Street, all three main indexes finished higher as consumer discretionary, financials and real estate stocks drove gains. Energy shares were the biggest losers on the day, with crude prices down as Trump acknowledged that the Iran war had played a role in his party's sweeping defeat.

The Dow Jones Industrial Average rose 3.03%, the S&P 500 was up 1.58% and the Nasdaq Composite gained 1.44%.

The MSCI All-World index was up 1.38%, while Europe's STOXX 600, which has acted as a hedge against AI-related risks, jumped 1.82% to two-month highs.

"Markets hate uncertainty and even though a lot of what the result was had been priced in ahead of time, getting confirmation of that last night brings certainty to markets," said Clayton Allison, portfolio manager at Prime Capital Financial. "Now this brings questions as to what actually gets done in Washington over the next two years. But the markets love to see that there is a resolution to a catalyst event."

Opinion polls have shown Democratic voters favoring more control over AI, and investors expect the Democratic-controlled Congress to apply more scrutiny to the sector.

The AI boom has helped propel global markets in recent years, driven by heavy spending from tech giants racing to build data centers and expand computing capacity. That has made investors acutely sensitive to anything that could derail the technology's rapid expansion.

Advanced Micro Devices rose 1% after the US chipmaker forecast faster growth through 2027, reassuring investors that demand for AI infrastructure remains strong.

Brent crude oil futures fell nearly 9% to settle at USD 94.62 a barrel as investors weighed Washington's next move in talks to end the wars in Ukraine and Iran against worries that recent attacks in both conflicts could further disrupt supplies.

"Trump took us to war without any Congressional authority and this tells that we're going to get the situation in Iran under control," said Bill Strazzullo, chief market strategist at Bell Curve Trading. "The market is responding to the fact that we're going to have at least some oversight."

SAFE-HAVEN BID

Treasuries rallied as investors expect gridlock in Washington to cut government spending, with AI regulation also possibly slowing growth and reducing the need for rate hikes.

The yield on the benchmark US 10-year Treasury note was down 6.62 basis points on the day at 4.88%.

The broadly weaker dollar left the euro up 0.34% at USD 1.1231 and the pound 0.44% higher at USD 1.347.

The yen and the Swiss franc — both safe-haven currencies — also notched gains. The Swiss franc was up 0.49% against the dollar at 0.817 francs. The Japanese yen strengthened 0.16% to 158.4.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.23%.

In cryptocurrencies, bitcoin gained 3% to USD 80,164.99. Ether rose 5.6% to USD 2,421.84.

Spot gold rose 3.49% to USD 4,065.80 an ounce.

(Reporting by Chibuike Oguh in New York; Editing by Kirsten Donovan, Aurora Ellis, and Jamie Freed)