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7.30am update: Global rally continues

Market nerves settle as Trump adopts moderate tone

Donald Trump vid clipMarkets reduced their losses and made some gains following Donald Trump’s triumph in the race to the White House.

There was an initial bout of selling on world trading floors as the man regarded as a danger to stability; who has been scandalised and ridiculed in equal measure, prepared to take up the most powerful job in the world.

However, his compromising comments following his election helped ease nerves and buyers returned. Asian markets rallied overnight Thursday and the dollar strengthened.

Oil also ticked up. West Texas Intermediate crude futures were up 15 cents at $45.42 a barrel this morning. Brent crude oil futures were trading at $46.70 per barrel, up 34 cents.

Japan’s Nikkei leapt 7% at one point after sinking 5% on Wednesday. Australian stocks rose 3.3% in the largest daily gain since late 2011 and Shanghai was up 1.3%

US investors have discounted wider concerns to focus instead on Trump’s key policy priorities, which include generous tax cuts and higher infrastructure and defence spending, along with deregulation for banks.

They were also encouraged by his more conciliatory comments after his presidency was confirmed. He said: “It is time for America to come together as one united people.”

In contrast to his belligerent campaign statements he offered a soothing message to a country made up of people of “all races” and said he would be “president of all Americans.”

He said he expected the US to have “great relations” with other countries.

“While we will put America’s interests first we will deal fairly with everyone. We will seek common ground, not hostility, partnership, not conflict.”

He promised to embark on a programme of “national growth and renewal” and pledged to build the strongest economy in the world.

Immediately after his victory the FTSE 100 plunged by 100 points at the opening of the London Stock Exchange, but was trading 68.7 points (1%) higher at the close at 6911.84.

 

Mrs Clinton had looked to be on course for victory, but in echoes of the Brexit vote in the UK many voters appeared to have concealed their intentions in opinion polls.

FTSE 100                  6,911.84          + 68.71     +1%

Dax                          10,646.01         + 163.69   +1.56%

CAC 40                     4,543.48          + 66.58    + 1.49%

Dow Jones                                        + 256.95   + 1.4%

Before Tuesday’s voting, Clinton led Trump, 44% to 39% in the last Reuters/Ipsos national tracking poll.

When he declared his intention to seek election, Trump was quoted as a 150/1 shot by bookmakers. A Reuters/Ipsos States of the Nation poll gave her a 90% chance of defeating Trump and becoming the first woman elected US president.

Mexico remains cautious following threats that Trump will rip up a free trade agreement and build a wall on the US border.

On his way to victory, he has offended Muslims, the disabled, Republican Senator John McCain, Fox News anchor Megyn Kelly, the family of a slain Muslim-American soldier, a Miss Universe winner and a federal judge of Mexican heritage.

But despite his billionaire status he has also spoken to the ordinary Americans, the trailer park residents who feel excluded and, by some degree threatened by what they see as a world indifferent to their interests.

Reaction

Ben Shappell, senior manager for RSM US, said: “It’s early days, but the mood seems to be cautiously optimistic about the future relationship between the US and the UK, and in particular Scotland.

“There is a lot of goodwill between both nations so this could be a great opportunity for UK and Scottish businesses to seize. The UK may even move to the front of queue on a meaningful trade deal with the US.”

Allan Hogarth, executive director of the Scottish North American Business Council, said: “The US has always been a vital and open market for Scotland and there would be concern if trade flows were threatened. However, we will continue to work hard to maintain and strengthen the special transatlantic relationships through trade and investment for Scottish businesses.”

£/$                                1.2431                          + 0.49%

£/€                               1.1379                          + 1.44%

€/$                               1.092                            – 0.93%

David Jane, manager of Miton’s multi-asset fund range said: “Donald Trump, and the Republicans controlling both the House and Senate, is the result that markets least expected.

“However, the initial negative reaction in financial markets is being quickly unwound as markets realise the longer term implications. While many Asian markets knee-jerked a long way lower in the shock of the moment, as people have come to make considered assessments, the reaction seems more rational.

“What we do know is that his policies will be broadly inflationary. Whether it is his protectionist policies, controlling immigration or investment in infrastructure, all point to a more inflationary tendency.

“Demand is likely to be higher for natural resources as a consequence of the infrastructure spend he is likely to make, although we doubt he will be building a wall between the US and Mexico. This is clearly positive for our positions in materials globally.

“If he manages to introduce tariffs on certain imports, this will also lead to higher prices in the US. That said, it’s not clear whether he will be able to implement such policies as the rest of his party are very pro-business and vested interests will be strongly against anything that damages US business interests.

“He also wants to control immigration, particularly illegal immigration. Clearly, the effect of immigration is to put downward pressure on wages, so it is also inflationary at the margin and in the longer term.”

Tom Stevenson, investment director for personal investing at Fidelity International, said: “It is important investors keep their head, now more than ever. 

“In the short term, the most immediate impact of the election result in policy terms may well be a postponement of the expected interest rate hike next month. The Federal Reserve is certain to tread extremely warily if market turbulence persists. While investors will inevitably find it hard to keep their eyes on their long-term financial goals as markets react it is essential for them to do so.”

Nigel Green, founder and CEO of deVere, said: “Global markets were shaken earlier in the day after Trump swept to victory ahead of Hillary Clinton.

“This was expected as Trump was the outsider who represents uncertainty, which always creates volatility in the markets.

“However, financial markets have recovered somewhat after Trump’s acceptance speech due to its notably conciliatory tone and content.  It offered reassurance and the markets have responded accordingly.”

Valentijn van Nieuwenhuijzen, chief strategist at NN Investment Partners. said:  “The Trump victory ushers in a period of uncertainty, as his presidency could result in a clear disruption of the status quo. This uncertainty is centred on possible budget and monetary measures, international trade, immigration and foreign policy issues such as the deal with Iran.

“We expect risky assets to suffer as long as the uncertainty lingers, which is likely to be quite some time, as the president will not be inaugurated until 20 January. Even after that date, visibility may remain limited until Trump either turns out to be a pragmatist who significantly waters down some of his campaign threats and promises, or decides to implement his populist agenda.”

> Colin McLean: Change looming in world order

 

 

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