(Bloomberg) – Donald Trump's unlikely rise to power is providing a shot in the arm for global financial markets, with stocks and commodities rallying on optimism that his fiscal-stimulus plans will boost the global economy.
The MSCI All Country World Index wiped out its monthly drop and the Dow Jones Industrial Average climbed to a record high. Copper was set for its biggest back-to-back jump in five years, gaining alongside lead, zinc, aluminum and the companies that produce them. The dollar rose against most major peers, while government bonds extended their selloff as Trump's win bolstered bets on faster inflation.
Traders are betting Trump and a Republican-controlled Congress will lower taxes, ease corporate regulation and ramp up spending to spur economic growth. He pledged to at least double the $275 billion five-year building plans of rival Hillary Clinton, while saying infrastructure will become "second to none" with millions working on projects. That also means commodities used to build everything from airports to bridges would benefit under his presidency, according to Goldman Sachs Group Inc.
"It's a relief rally of the certainty of the outcome of the election and after the conciliatory tone that Trump took," said Nick Skiming, a fund manager at Jersey, Channel Islands-based Ashburton Ltd. His firm oversees $10 billion. "We know from Trump's policies that he wants to reduce taxes and embark on fiscal spending and if he gets those approved, that will be expansionary for the U.S. economy in the short term."
Stocks
MSCI's global gauge advanced 0.7 percent at 9:56 a.m. in New York, after closing little changed on Wednesday.
The Dow Average rose 139.70 points, taking it above its Aug. 15 record. The S&P 500 Index advanced 0.7 percent to 2,177.44. Drugmakers and banks climbed on bets the Republican administration will mean less regulatory oversight in those sectors than a win for Clinton.
Perrigo Co. rose after saying it will review options including the sale of rights to the royalty stream from a multiple sclerosis drug. Shake Shack Inc. jumped after the burger chain raised its annual sales forecast. MetLife Inc. gained after announcing a plan to buy back $3 billion in shares. Kohl's Corp. rallied after posting better-than-estimated earnings and boosting its stock repurchase program.
The Stoxx Europe 600 Index extended a four-day rally, led by UBS Group AG and Credit Suisse Group AG, which get more than 35 percent of their revenues from the Americas.
Lenders that until recently were the year's worst-performing sector in the equity benchmark are bouncing back as bond yields are rebounding from their summer lows, easing concerns over profitability.
"It's a favorable phenomenon for banks when they do not have yield curves with negative rates," said Pierre Mouton, a fund manager who oversees about $8.5 billion at Notz, Stucki & Cie. in Geneva, referring to the difference in yields between short- and long-dated bonds, which lenders profit from. "Public spending and measures more or less protectionist will get inflation going. So the rates will increase in the U.S. Since the U.S. bond market guides the rest of the world, there is also a steepening effect on the yield curve in Europe."
The clearest message delivered by Donald Trump in his election victory speech was a focus on greater infrastructure spending in the U.S. (Photo: AP)
Commodities
All industrial metals advanced on the London Metal Exchange, with zinc adding 1.8 percent, nickel up 0.3 percent and copper advancing 3.4 percent by 2:28 p.m. London time. The LME index on Wednesday rose 2.1 percent to its highest level since June last year.
"The clearest message delivered by Donald Trump in his election victory speech was a focus on greater infrastructure spending in the U.S.," Goldman's analysts including Damien Courvalin and Jeffrey Currie said in a Nov. 9 report. "Without specific details it is hard to quantify the impact on commodity demand, however such policies would support steel, iron ore, zinc, nickel, diesel and cement."
Oil fell as the market's focus shifted from Trump's shock U.S. presidential election victory to questions about OPEC's ability to rebalance crude supply and demand.
West Texas Intermediate for December delivery lost 44 cents to $44.83 a barrel on the New York Mercantile Exchange after earlier rising 0.8 percent. Brent for January settlement fell 20 cents, or 0.4 percent, to $46.16 a barrel on the London-based ICE Futures Europe exchange, trading at a 60-cent premium to January WTI.
