Stocks in Europe have taken their lead from the astonishing turnaround in US markets, which saw the Dow Jones hit a new record high. In just a matter of hours, markets have switched from the election victory as a glass half empty to a glass half full. The perceived negatives of a Trump victory of protectionist trade policy and his anti-Federal Reserve rants have been put aside in hopes he will run a pro-business administration supported by tax cuts and fiscal spending.
The FTSE 100 gained around 1%, building on the recovery that started yesterday. Basic materials and industrial sectors led gainers on hopes of a US-led infrastructure spending boom while perceived havens like utilities lost out.
There were similar gains across Europe with Germany’s gaining around 1%, helped by well-received results from Siemens (LON:0P6M).
Shares of Siemens jumped 4% as investors reacted to its fiscal fourth-quarter results and its plans to spin-off its healthcare unit. The planned spin-off couldn’t come at a better time for sentiment towards the healthcare sector. Pharmaceutical and biotechnology stocks surged in relief at avoiding potentially profit-harming new regulations under a Hillary Clinton presidency. The German industrial giant reported a 20% rise in net profits, which fell short of consensus expectations.
The rally in British healthcare stocks was curtailed by poorly-received results from AstraZeneca LON:AZN). The UK pharmaceutical firm continues to get stung by generic competition for its cholesterol drug Crestor, though cost-cutting and a one-off tax gain minimised the damage from falling sales.
Shares of Barclays (LON:BARC) and RBS (LON:RBS) both gained close to 4% on Thursday as bond yields continue to rise. The outlook for interest rates has been muddied by the Donald Trump victory, but markets continue to price in a December rate hike from the Federal Reserve and a more neutral Bank of England. Central banks aside, despite all the “anti-Wall Street” rhetoric, cutting red tape like the Dodd-Frank act would be a positive for the banking industry.
US stocks look like making a very strong open with a fresh record high expected for the Dow Jones Industrial Average. Markets are hearing some of the first reactions from US central bankers to the election result. The San Francisco Fed’s John Williams has clearly taken heart from the resolute reaction in financial markets, saying a gradual rise in rates still makes sense. James Bullard speaks later.
USA pre-opening levels
S&P 500: 13 points higher at 2,176
Dow Jones: 128 points higher at 18,717
Nasdaq 100: 41 points higher at 4,825
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