AFP

London

Europe’s leading stock markets and the dollar rallied yesterday as traders welcomed the Republican victory in the US midterm elections.

London’s benchmark FTSE 100 index rose 1.32% to end the day at 6,539.14 points, while Frankfurt’s DAX 30 climbed 1.63% to 9,315.48 points and in Paris the CAC 40 jumped 1.89% to 4,208.42 points.

The gains erased losses posted on Tuesday after the European Union slashed its economic forecasts for the eurozone.

But equity markets brushed off news yesterday of sliding retail sales across the eurozone to join a rally by the dollar against major rival currencies after Republicans took control of the US Senate from Democrats overnight, which many investors hope might result in more business-friendly policies in Washington.

Gold prices dived to a fresh four-year low and crude oil futures also initially continued their plunge on the effect of a stronger dollar, although they later rose on news that US stockpiles had not grown by as much as expected.

The result of the mid-term elections is a stinging setback for US President Barack Obama and his fellow Democrats for the last two years of his presidency.

“The win for the Republicans in the US mid-term elections has left Obama as a lame duck president and sent the greenback soaring,” said analyst Tony Cross at brokers Trustnet Direct. “Because the commodity prices are in dollars, any appreciation of the dollar has a corresponding depreciation on the commodity price,” he noted in reaction to tumbling gold and oil prices.

On the London Bullion Market, gold plunged to $1,137.93 an ounce—which was its lowest level since April 23, 2010. It later stood at $1,142, which compared with $1,166.50 late in London on Tuesday.

Oil prices initially slid to a four-year low, but the market rebounded in afternoon deals as traders digested news of a smaller-than-expected increase in crude supplies in top consumer the US.

In foreign exchange, the euro slid to $1.2477 from $1.2545 late in New York on Tuesday.

The dollar at one point hit a near seven-year high against the Japanese currency, at 114.84 yen.

Wall Street advanced and the Dow hit a new record yesterday on the Republican victory.

The Dow Jones Industrial Average shot up to 17,481 points shortly after the opening bell.

It stood at 17,459.69 points in midday trading, a gain of 0.44%.

The broad-based S&P 500 rose 0.39% to 2,020.02 while the tech-rich Nasdaq Composite Index edged up 0.06% to 4,626.35.

On the corporate front, shares in Marks and Spencer soared 9.7% to 444.1 pence, topping London’s FTSE 100 winner board in the process.

Although the British retailer posted only mediocre half-year profits, the figure “beat (forecasts) and improvement to gross margins have taken investors by surprise” said Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers.

“Gross margin has shown a strong improvement, in part due to the tight control of costs which M&S is currently undertaking,” he said in a note to clients.