Dow Average Climbs to Record High

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, the Dow Jones Industrial Average climbed to a record high and emerging-market shares advanced. 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 which 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.
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“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.”

Bloomberg

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell