London (AFP) - Share prices surged on Wednesday as traders digested President Donald Trump’s heavy defeat in US midterm elections, which saw his Republican party lose control of Congress.

Democrats seized control of both houses in a victory that gives them the power to block legislation, open investigations into Trump’s administration and thwart his judicial and senior government appointments.

After opening higher European indexes jumped in the afternoon by around 2.0 percent and US stocks rivalled those gains on opening, with the Dow up 2.3 percent.

Analysts are expecting the new reality in Washington to bring political stagnation, with Trump having earlier promised he would become “Mr Veto”.

“Gridlock might be bad for politics, but it is good for markets, and traditionally US indices experience a strong rally after midterm elections,” said Kathleen Brooks, research director at trading platform XTB.

“After the recent rout in stocks, especially AI linked stocks, the stage could be set for a strong performance into year end,” she said.

As stocks rose, the dollar sank against other major currencies and the price of oil tanked – Brent crude seeing 3.0 percent wiped off its value.

Trump has been a staunch backer of US technology firms but the Democratic victory has sparked fear that AI and data centre development could be regulated.

That fear initially saw Asian markets struggle, but US indexes showed no signs of sluggishness, with the tech-heavy Nasdaq posting a 1.6 percent rise after tumbling since last week.

The gains in Europe came despite official data Wednesday showing that eurozone inflation reached a three-year high of 4.0 percent in October.

Markets across Asia also performed strongly, though Tokyo ended lower as its tech sector struggled.

Tens of millions of Americans voted in the crucial polls pitched as a referendum on the White House, as anger grows at surging petrol prices, the impact of tariffs and the Iran war.

Bond yields avoided the volatility seen recently, while gold benefited from its status as a safe-haven investment.

Patrick O’Hare from Briefing.com highlighted that Trump had signalled an end to the election by congratulating the Democrats and saying he looked forward to working with them.

“Reading between those lines, the market took comfort in the understanding that the overall election result won’t be contested,” he wrote in a note.

Aside from the US vote, investors continued to follow third-quarter earnings.

BMW said Wednesday that it would step up planned job cuts as it reported a drop in third-quarter profit, news that saw its share price soar by 6.0 percent.

Google meanwhile said it planned to invest $15 billion in Malaysia over the next two years to build data centres and other infrastructure, and its shares rose by 3.4 percent.

- Key figures at around 1440 GMT -

New York - Dow: UP 2.3 percent at 52,967.68 points

New York - S&P 500: UP 1.4 percent at 7,675.26

New York - Nasdaq Composite: UP 1.6 percent at 25,766.82

London - FTSE 100: UP 1.8 percent at 10,826.43

Paris - CAC 40: UP 2.1 percent at 8,190.45

Frankfurt - DAX: UP 2.1 percent at 26,406.86

Tokyo - Nikkei 225: DOWN 1.4 percent at 62,188.63 (close)

Hong Kong - Hang Seng Index: UP 1.7 percent at 23,919.50 (close)

Shanghai - Composite: UP 2.2 percent at 3,686.17 (close)

Brent North Sea crude: DOWN 3.0 percent at $100.53 per barrel

West Texas Intermediate: DOWN 3.1 percent at $93.14 per barrel

Euro/dollar: UP at $1.1259 from $1.1191 on Tuesday

Pound/dollar: UP at $1.3480 from $1.3413

Dollar/yen: DOWN at 158.47 yen from 158.75 yen

Euro/pound: UP at 83.53 pence from 83.43 pence

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