Wall Street slumps on Trump win European stocks pare early losses
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