Investors have been warned to brace for more sharp moves on financial markets as uncertainty endures over how Trump’s campaign rhetoric will translate into policies.
But after initially struggling to find direction on Thursday the Dow closed up 218 points at 18807, a rise of 1.17%. The S&P 500 also gained slightly, rising 0.2% but the tech-heavy Nasdaq dipped 0.81%. Trump has clashed with Silicon Valley and threatened Apple, Nasdaq and the world’s largest company, over privacy and its overseas manufacturing. Apple dropped 2.79% on Thursday.
Markets benefitted from a continuing sense of relief over Trump’s conciliatory tone in his early remarks, including those following his meeting with the US president, Barack Obama.
However European shares, including London’s FTSE 100 index, could not hold on to their early gains as worries grew over the president-elect’s coming longer term impact on global growth due to his protectionist policies. The billionaire businessman vowed on the campaign trail to put American jobs first and scrap or renegotiate trade deals.
European markets were also hurt by investors moving their money out of shares and into bonds as yields rose on the prospect that the arrival of a big spender in the White House would mean the US had to issue more government debt. A new flurry of bonds coming on to the market would push down the price of bonds, and yields would move inversely to prices.
“It has been another interesting day for the FTSE 100, with the index retreating from the morning high, hit by heavy losses for high dividend stocks, which are looking less attractive after the pickup in US bond yields,” said Chris Beauchamp, chief market analyst at the online trading company IG.
The FTSE 100 closed down 1.2% at 6827.98, having gained 1% on Wednesday after Trump’s presidential victory was confirmed.
Analysts said the FTSE’s change in direction during the day Thursday reflected a sense of confusion over whether Trump would match tough talk during the presidential race with action once in power.
“It is perhaps apt that the reaction to Donald Trump’s victory has been so confused, flipping between bombast and baloney much in the same manner as the soon-to-be president,” said Connor Campbell, financial analyst at the spread betting firm Spreadex. “That’s all well and good for the short-term, especially for those traders looking to benefit from the present volatility; one suspects the seemingly rudderless movements may soon wear thin, however.”
There were clear winners and losers from Trump’s presidential victory. His vows to ramp up spending on defence and infrastructure boosted stocks in the defence, construction and commodity sector. The prospect of looser regulation lifted shares in banks.
Analysts said more muddled days of trading lay ahead as investors continued to weigh the potential impact of a Trump presidency on different stocks, sectors and regions as well as on the global economy as a whole.
“Global growth could be somewhat slower in the years ahead if protectionism takes hold. The additional uncertainty will have a negative impact on equity markets but the extent needs to be kept in perspective,” said Glyn Owen at Momentum Global Investment Management. “On balance we believe that markets will drift for a period in the face of the uncertainty and the increased volatility we have seen in recent weeks will be a feature for the year ahead.”
On currency markets there was some respite for the pound as it jumped to a six-week high against the euro and rose against the dollar. Traders put the small recovery in the pound – which has tumbled since the UK’s vote to leave the EU – down to political worries now shifting to mainland Europe.
A series of elections are due in Europe next year with the Dutch, French and Germans going to the polls, and possibly the Italians too if their government loses a key referendum next month. After Trump’s win there are predictions that populist movements in those countries will gain further ground.
Against that backdrop the pound was up 1.5% against a flagging euro, to €1.1537 in late trading. The pound was up 1.4% against the dollar to $1.2578. That in turn put further pressure on the FTSE 100. The internationally diverse stock index has benefited from the pound’s post-referendum weakness because it has flattered the earnings of those component companies that report in dollars.
guardian.co.uk © Guardian News and Media Limited 2010
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