By Steve Goldstein
European stocks advanced on Thursday, extending gains as traders reacted to the possibility of a divided U.S. government.
Up 2% on Wednesday, the Stoxx Europe 600 (STOXX:XX:SXXP) rose 0.7%, buoyed by the technology sector with chip-equipment maker ASML (AMS:NL:ASML) and software maker SAP (ETR:XE:SAP) advancing.
The German DAX (XEX:DX:DAX) , French CAC 40 (PAR:FR:PX1) , and U.K. FTSE 100 (FTSE:UK:UKX) each gained.
Futures on the Dow Jones Industrial Average (CBT:YM00) rose 325 points, after the 367-point gain for the blue chips (DOW:DJIA) on Wednesday.
Former Vice President Joe Biden is leading in the Associated Press electoral college count, needing only Georgia, Nevada, North Carolina or Pennsylvania to defeat President Donald Trump. At the same time, the AP tally on the U.S. Senate is deadlocked at 48. The comment from Sen. Majority Leader Mitch McConnell of a possible stimulus deal by the end of the calendar year also helped financial markets.
“Yesterday illustrated the esteem in which politicians are held by financial market participants. Equities soared on the rising probability of gridlock in Washington, which should prevent either party inflicting too much damage on corporate America,” said Ian Williams, a strategist at U.K. brokerage Peel Hunt.
“Given the continued rally in equity markets overnight, it appears as though investors are seeing an increased likelihood of a Biden victory with a split Congress, rather than a drawn-out legal battle over the election result,” added analysts at RBC Capital Markets.
The Bank of England, meanwhile, extended the size of its quantitative easing program by £150 billion as it forecasts the U.K. economy to contract in the fourth quarter. England’s new one-month lockdown starts on Thursday.
It was a mixed session for major European banks. ING (AMS:NL:INGA) shares slumped 6% as the Dutch lender and insurer reported a worse-than-forecast € 788 million third-quarter profit. “This highlights the ongoing challenge ING’s new management face to offset a structurally weak top line. One lever the market will be hoping they can pull is on costs, however there was no evidence of this in the quarter with higher costs year on year,” said Russell Quelch, financial specialist sales at Redburn.
Commerzbank (ETR:XE:CBK) also dropped, as the German lender reported a €69 million loss as revenue missed analyst expectations.
Société Générale (PAR:FR:GLE) rose 3%, as the French bank reported a third-quarter profit of €862 million and lifted its capital ratio outlook for the year.
Engineering software maker Aveva (LON:UK:AVV) dropped after reporting a 38% drop in adjusted earnings before interest, taxes, depreciation and amortization for its Sept. 30-ending half year.