Wall Street slumps on Trump win Euro­pean stocks pare early losses

Kuwait Times - - BUSINESS -

Wall Street stocks dipped early yes­ter­day in choppy trad­ing fol­low­ing Don­ald Trump’s shock win in the US pres­i­den­tial elec­tion, as hopes of a pro-busi­ness agenda par­tially blunted the higher un­cer­tainty. Mar­kets ini­tially plunged in af­ter-hours trad­ing on Trump’s win, but stead­ied once trad­ing opened, veer­ing in and out of pos­i­tive ter­ri­tory. Some an­a­lysts said the Repub­li­can’s pledges of in­creased in­fra­struc­ture spend­ing and lower taxes could boost the econ­omy. About 50 min­utes into trad­ing, the Dow Jones In­dus­trial Aver­age was down 0.1 per­cent at 18,316.03.

The broad-based S&P 500 lost 0.4 per­cent to 2,130.44, while the tech-rich Nas­daq Com­pos­ite In­dex fell 0.6 per­cent at 5,162.27. An­a­lysts said the elec­tion out­come opens a pe­riod of pol­icy un­cer­tainty af­ter Trump’s cam­paign fa­vored a va­ri­ety of po­ten­tially rad­i­cal steps, in­clud­ing tear­ing up in­ter­na­tional trade agree­ments, putting po­lit­i­cal pres­sure on the Fed­eral Re­serve and pur­su­ing a more friendly re­la­tion­ship with Rus­sia.

“What peo­ple prom­ise on the cam­paign trail and what ac­tu­ally hap­pens are two dif­fer­ent things,” said JJ Ki­na­han, chief mar­ket strate­gist at TD Amer­i­trade “So we’re still spec­u­lat­ing un­til he ac­tu­ally takes of­fice and the new Congress comes.”

“It’s now look­ing like a bad day, but no sense of panic.” Jack Ablin, chief in­vest­ment of­fi­cer at BMO Pri­vate Bank, said the muted re­ac­tion seen the first day af­ter the vote may not per­sist.

“In­vestors don’t like un­cer­tainty and Trump’s pres­i­dency em­bod­ies un­cer­tainty,” Ablin said. “Emo­tions will dom­i­nate mar­ket ac­tion over the next sev­eral trad­ing days, po­ten­tially lead­ing to ex­ag­ger­ated mar­ket swings.” Phar­ma­ceu­ti­cal stocks, seen as vul­ner­a­ble to price caps in a Clin­ton pres­i­dency, ral­lied. Pfizer surged 6.6 per­cent, My­lan 5.2 per­cent and Bio­gen 5.2 per­cent.

Bank stocks, which had also been seen as vul­ner­a­ble to tougher reg­u­la­tion in a Demo­cratic-led Wash­ing­ton, pushed higher. JPMor­gan Chase jumped 3.7 per­cent and Bank of Amer­ica 3.2 per­cent. Cater­pil­lar was an­other win­ner, surg­ing 6.5 per­cent on an­tic­i­pa­tion of greater in­fra­struc­ture spend­ing.

But hospi­tal stocks were pum­melled in ex­pec­ta­tion Trump will fol­low through on a pledge to re­voke Oba­macare. HCA Hold­ings sank 16.4 per­cent, Tenet Health­care 27.5 per­cent and Com­mu­nity Health 26.4 per­cent. Tech­nol­ogy stocks fell, with Ap­ple los­ing 2.3 per­cent, Ama­zon 2.9 per­cent and Google par­ent Al­pha­bet 1.7 per­cent.

The Euro­pean stock mar­kets re­acted with a sharp ini­tial down­turn to mav­er­ick Repub­li­can Don­ald Trump’s shock elec­tion win yes­ter­day, but quickly re­cov­ered their poise with sur­pris­ing re­silience.

Asia kicked off a “Trump slump”, with Tokyo div­ing on con­cerns over the untested poli­cies of the bil­lion­aire busi­ness­man and re­al­ity TV star. Europe fol­lowed suit, tip­ping about two per­cent lower at the open in Frank­furt, Lon­don and Paris. But all three mar­kets re­bounded into slen­der

gains af­ter Trump’s con­cil­ia­tory vic­tory speech and as Wall Street opened firmer be­fore ner­vously flit­ting in and out of neg­a­tive ter­ri­tory.

“Don­ald Trump’s vic­tory in the US pres­i­den­tial elec­tion has, so far, had less im­pact on fi­nan­cial mar­kets than most an­tic­i­pated,” said An­drew Ken­ning­ham, Se­nior Global Econ­o­mist at Cap­i­tal Eco­nom­ics. “We sus­pect that it has also made lit­tle dif­fer­ence to the im­me­di­ate out­look for the global econ­omy,” he said, adding how­ever that there were “big­ger ques­tion marks” over longer-term prospects.

“Af­ter that ini­tial plunge, Euro­pean mar­kets have seen a re­mark­able re­cov­ery this post-elec­tion yes­ter­day,” said Spreadex an­a­lyst Con­nor Camp­bell.

“A sur­pris­ingly pres­i­den­tial Trump vic­tory speech seems to have re­as­sured in­vestors, the talk of in­fra­struc­ture spend­ing and a lack of usual vul­gar­ity al­low­ing for a rel­a­tive aura of calm.”

“As peo­ple have come to make con­sid­ered as­sess­ments, the re­ac­tion seems more rational,” added David Jane at Mi­ton’s. Sum­ma­riz­ing the im­pact of Trump’s ex­pected eco­nomic poli­cies, Jane con­cluded that they will be “broadly in­fla­tion­ary”. This means, he said, that they will be “sup­port­ive of eq­uity mar­kets and neg­a­tive for bonds”.

The ex­tra­or­di­nary US elec­tion out­come has drawn di­rect com­par­isons with Bri­tain’s shock Brexit vote in June to leave the Euro­pean Union. “Of course, just as Bri­tain has not yet Brex­ited, Amer­ica has not of­fi­cially en­tered the era of Trump,” said Camp­bell.

‘Plenty of volatil­ity’

“That does, how­ever, leave plenty of room for volatil­ity as 2016 be­gins to wrap up, let alone the months and years of an ac­tual Trump pres­i­dency.” In­vestors fled to safe-haven as­sets, in­clud­ing gold and Ger­man govern­ment bonds. Re­becca O’Ke­effe, head of in­vest­ment at stock­bro­ker In­ter­ac­tive In­vestor, noted there were “sig­nif­i­cant” wor­ries over Trump’s poli­cies. “Trump is a huge leap into the un­known,” she told AFP.

“Trump is likely to cut taxes, in­vest in US in­fra­struc­ture, be very progrowth at home but be highly pro­tec­tion­ist when it comes to the rest of the world.” The in­com­ing pres­i­dent in­sists he could bring jobs back to Amer­ica by rene­go­ti­at­ing in­ter­na­tional trade deals, while he has re­peat­edly vowed to ruth­lessly pur­sue growth of the world’s big­gest econ­omy.

Phar­ma­ceu­ti­cal stocks re­bounded as Clin­ton’s cam­paign for cheaper drugs was off the ta­ble af­ter her de­feat, with Sanofi, Bayer and As­traZeneca all sharply higher. De­fence stocks also rose on ex­pec­ta­tions of higher US mil­i­tary spend­ing, with Thales shares hitting an all-time high in Paris and BAE Sys­tems ris­ing in Lon­don. ArcelorMittal surged in Paris on ex­pec­ta­tions of higher in­fra­struc­ture spend­ing by a Trump ad­min­is­tra­tion. Auto shares, mean­while, dropped on fears of pro­tec­tion­ist mea­sures im­posed by Trump, which sent BMW, Peu­geot and Mercedes shares tum­bling. Fi­nan­cials were mixed, but Spain’s sec­ond­biggest bank, BBVA, fell more than eight per­cent, pun­ished by in­vestors for its high ex­po­sure to the Mex­i­can mar­ket. — Agen­cies

NEW YORK: Traders work on the floor of the New York Stock Ex­change (NYSE) the morn­ing af­ter Don­ald Trump won a ma­jor up­set in the pres­i­den­tial elec­tion yes­ter­day in New York City. — AFP

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