Europe close: Stocks fall as markets reassess mid-term elections

(Sharecast News) - European stocks finished mostly lower on Thursday with the benchmark Stoxx 600 retreating from a three-month high following a steep sell-off on Wall Street.

The Stoxx 600 dropped 0.5% by the close, having gained as much as 0.7% earlier on, with losses in London, Frankfurt, Zurich and Milan providing a drag.

The pan-European benchmark had settled at 657.40 on Wednesday, its highest close since 14 August, after the sweeping victory by the Democratic Party in the US mid-term elections.

However, Wall Street's three main indices tanked in morning trade in New York - the Nasdaq was down 4.3% by the close of trade in Europe - as traders reassessed the impact of the shift in power in Washington. Heightened concerns that the Democrats' sweeping victory could lead to greater scrutiny of AI infrastructure spending and data centre development weighed heavily on companies in the AI and chip sectors.

European chipmakers were feeling the heat, including ASM International, ASML, BE Semiconductor Industries, Aixtron and Infineon.

In other news, the Bank of England raised interest rates for the first time in more than three years, by 25 basis points to 4%. In its accompanying statement, the MPC noted that CPI was set to rise to "around 5%" by the middle of next year before falling back as annual energy price inflation fades.

Oil prices rebounded after an initial sharp drop in the morning session. Front-month Brent crude was down 2.4% at $96.88 a barrel, though still down nearly 16% on the week amid increased hopes surrounding diplomatic efforts between the US and Iran.

In economic data, the S&P Global eurozone construction PMI total activity index fell to 42.5 from 43.4 in September, one of the sharpest declines seen since the pandemic. Output fell at the steepest rate since April, driven by commercial and civil engineering, while new orders declined at the strongest pace in six months. Cost pressures, meanwhile, reached a five-month high.

In equity news, shares in Rheinmetall plunged as the German defence giant cut its full-year guidance, blaming contract delays. Sector peers Renk, Kongsberg and BAE Systems also fell amid speculation that the Democrats' mid-term elections victory could affect defence spending.

Renk stock was also hit as the company warned that delays at major defence contractors could slow the conversion of its order book into revenue.

Aker BP also fell sharply after BP sold a 5% stake in the Norwegian oil and gas producer for more than $1bn, as the British energy giant looks to strengthen its balance sheet through asset disposals.

Maersk shares were down despite the Danish shipping group raising its 2026 profit guidance for a third time, with the stock pulling back after having gained nearly 50% so far this year.