Europe: Shares recover after US midterm vote; Spanish banks rally

[MILAN] European shares rebounded on Wednesday after US midterm elections delivered no big surprise, while a string of solid earnings updates and a rally in Spanish banks on a favourable tax ruling also provided relief.

The pan-European STOXX 600 benchmark rose 0.9 per cent to a three-day high in a broad-based rebound that saw all major country and sectoral indexes trade in positive territory in early deals.

Democrats rode a wave of dissatisfaction with President Donald Trump to win control of the US House of Representatives on Tuesday, giving them the opportunity to block Trump's agenda and open his administration to intense scrutiny.

"With the Democrats taking over the House we will now have to see what gridlock in Congress means for policy. As for the market impact, a split Congress has historically been bullish for equities and we expect to see the same pattern again," said Torsten Slok, Chief International Economist of Deutsche Bank.

"It is too early to predict where policy will go ... What matters for markets is what will happen to trade policy, health care policy, immigration policy, and fiscal policy," he said.

Company results announcements drove the biggest movers on the STOXX 600, with Delivery Hero and Ahold rising 7 and 5.7 per cent respectively after solid updates. Adidas fell 5.1 per cent after the sportswear firm cut its revenue target due to a fall in sales in western Europe.

In the spotlight were Spanish banks after the Supreme Court ruled on Tuesday that lenders were not required to pay stamp duty on mortgages, sparing them from potentially having to reimburse billions of euros to borrowers who for years have paid the tax themselves.

Shares in Sabadell, BBVA, Santander and Bankia rallied more than 3 per cent.

REUTERS