- Title: Investors exuberant as Trump signals shift from austerity era
- Date: 10th November 2016
- Summary: LONDON, ENGLAND, UK (NOVEMBER 10, 2016) (REUTERS) PAN OF OFFICE PERSON WORKING AT COMPUTER PERSON LOOKING AT SCREEN CMC MARKETS LOGO (SOUNDBITE) (English): CMC MARKETS ANALYST, MICHAEL HEWSON, SAYING: "Markets are higher, not surprisingly given the bounce back, what we saw in the Dow overnight, the Dow hit a record high. I think at the moment the markets are focusing on the positive rather than the negative. Mr. Trumps' speech was very conciliatory, he also gave indications that he might look at doing some form of fiscal stimulus and given that he is a big supporter of tax cuts there is a perception that ultimately he might reform America's tax code." VARIOUS OF PERSON WORKING AT COMPUTER (SOUNDBITE) (English): CMC MARKETS ANALYST, MICHAEL HEWSON, SAYING: "I mean in the aftermath of the vote when it became apparent that Mr. Trump was going to win we saw an 800 point out of hours decline in the Dow which was a really significant down move. But when he did his acceptance speech sentiment switched quite sharply and he came across quite statesmanlike in complete contrast to all the rhetoric that had been a trademark of his campaign and I think markets are looking at a goldilocks scenario here, they're looking at the potential upside and not too much at the potential down side." VARIOUS OF PERSON WORKING AT COMPUTER (SOUNDBITE) (English): CMC MARKETS ANALYST, MICHAEL HEWSON, SAYING: "I think the big question here is will Donald Trump be a pragmatist, a businessman or will be succumb to his worst instincts. Now at the moment what we've got is the two main houses - the Congress and the Senate, they've both got majority for the Republicans so I think there's a perception that the more moderate Republicans will reign in the worst of Mr. Trump's instincts now that may seem naive but ultimately that's what markets are focusing on at the moment," PAN OF ROOM WITH PEOPLE WORKING VARIOUS OF PERSON WORKING AT COMPUTER (SOUNDBITE) (English): CMC MARKETS ANALYST, MICHAEL HEWSON, SAYING: "I think you could potentially argue that his campaign was a little bit of a sales pitch. The big question going forward is how will he undertake his role as President and how far will he be allowed to go by the Senate and Congress." VARIOUS OF MAN ON THE PHONE (SOUNDBITE) (English): CMC MARKETS ANALYST, MICHAEL HEWSON, SAYING: "At the moment I think markets are still pricing in a potential Fed rate rise. One of his criticisms of Janet Yellen is that she was keeping rates artificially low as a sop to the Democrat party. The fact of the matter is the U.S. economy is growing albeit at a much slower pace than it was a year ago. I think potentially he could welcome a rate rise now, certainly he's got no reason to oppose one seeing as he criticised Janet Yellen for keeping rates artificially low. But ultimately I think there is a risk we could potentially see the Fed delay a rate rise but some his spokes people have already come out and said he is quite happy for Janet Yellen to continue on at the Fed." PEOPLE WORKING IN OFFICE
- Embargoed: 25th November 2016 12:15
- Keywords: European stocks rise extraordinary gains Asia U.S. exuberance markets reaction Trump victory.
- Location: LONDON, ENGLAND, UK
- City: LONDON, ENGLAND, UK
- Country: United Kingdom
- Topics: Economic Events,Equities Markets
- Reuters ID: LVA00157V36VH
- Aspect Ratio: 16:9
- Story Text: European stocks rose on Thursday (November 10) following extraordinary gains in Asia and the United States, as exuberance shot through markets and reversed initial dives in reaction to Donald Trump's U.S. presidential victory.
Investors focused on Trump's priorities - including tax cuts and higher infrastructure and defence spending, along with bank deregulation - and set aside for the moment longer-term worries about whether he will slap punitive tariffs on Chinese and Mexican exports, risking a global trade war.
European stocks hit a two-week high, with the pan-European STOXX 600 index up 1.3 percent in early dealings, and "safe haven" government bonds sold off after Trump suggested he would spend billions on infrastructure.
This marked an abrupt change from the sharp recoil on markets on Wednesday after the Republican candidate's triumph.
Investors saw signs that Trump will ditch the budget austerity policies that Western governments have pursued since the 2008 global financial crisis after he takes over in January.
"When he did his acceptance speech sentiment switched quite sharply and he came across quite statesmanlike in complete contrast to all the rhetoric that had been a trademark of his campaign and I think markets are looking at a goldilocks scenario here, they're looking at the potential upside and not too much at the potential down side," said CMC Markets Analyst Michael Hewson.
"Mr Trumps' speech was very conciliatory, he also gave indications that he might look at doing some form of fiscal stimulus and given that he is a big supporter of tax cuts there is a perception that ultimately he might reform America's tax code."
The three major U.S. stock indexes rose on Tuesday and the dollar index against major currencies recovered from a trough of 95.885 plumbed on Wednesday to around 98.778 on Wednesday morning.
In a remarkable session for Japanese shares, the Nikkei jumped 7 percent at one point after sinking 5 percent on Wednesday.
Gains in Europe, where markets had already started to recover on Wednesday, were more modest. Britain's FTSE was up 0.95 percent, Germany's DAX rose 1.12 percent and France's CAC was up 1.06 percent by 0915 GMT.
The moves were led by Wednesday's sharp rises in U.S. Treasury yields. The 30-year Treasury bond yield gained almost 25 basis points in its sharpest rise in more than five years; yields on the 10-year note climbed 21 basis points to breach the 2 percent mark for the first time since January.
High-rated euro zone bond yields - which had sunk early Wednesday - rose sharply on Thursday, with the region's benchmark German 10-year bonds up 5 basis points to 0.23 percent, the highest level since May.
Trump's victory and opening comments have sharpened a debate about the austerity consensus that has prevailed across most of the developed world since the financial crisis.
If his actions match his rhetoric, it seems likely that Trump's administration will test the theory of whether central banks' cuts in interest rates to ultra-low levels and money printing should be replaced by budget measures to boost the world economy.
"I think the big question here is will Donald Trump be a pragmatist, a businessman or will be succumb to his worst instincts. Now at the moment what we've got is the two main houses - the Congress and the Senate, they've both got majority for the Republicans so I think there's a perception that the more moderate Republicans will reign in the worst of Mr Trump's instincts now that may seem naive but ultimately that's what markets are focusing on at the moment."
Ratings agency S&P Global on Tuesday affirmed the AA+ credit rating of the United States, but noted uncertainty over the future path of government debt would prevent any upgrade.
There were also lingering concerns about Trump's campaign promises to shield American jobs through possible protectionist trade policies.
Among Asia's trade-reliant economies, China and South Korea are particularly exposed to any hostile U.S. measures as they run large trade surpluses with the United States, Credit Suisse said in a research note.
Mexico's peso trimmed losses but was still within reach of a life-time low seen overnight.
For now, investors seemed willing to give the president-elect the benefit of the doubt, as witnessed by a broad advance in bulk commodity prices.
Copper rose to a near 16-month high on expectations that a Trump presidency could unleash a flood of infrastructure spending. Iron ore surged to its highest since January 2015.
Brent crude oil added to overnight gains made on the post-U.S. election surge in global markets, rising 0.22 percent to $46.46 a barrel.
Safe-haven gold pulled back sharply to $1,284.59 an ounce after rising to as high as $1,337.40 on Wednesday. - Copyright Holder: REUTERS
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