LONDON: Wall Street retreated from fresh record highs and other stock markets went negative Thursday as a 24-hour rally following Donald Trump’s shock election win fizzled out.
Hopes that Trump’s expected economic policies would help kickstart the US economy with government spending programmes took equity markets on an upward surge -- until analysts began to urge caution.
”There is clearly still a large degree of uncertainty regarding the economic policies of the incoming Republican administration,” said David Rees at Capital Economics. “We are not convinced that Trump will be able to get a massive fiscal expansion through Congress.”
London underperformed its European peers, losing over 1%, as investors fled high-dividend stocks “which are looking less attractive after the pickup in US bond yields”, suggested Chris Beauchamp, chief market analyst at IG.
Frankfurt and Paris posted slight losses at the end of the day.
Wall Street’s Dow index remained in the green, although off highs, after setting a new intraday record at 18,769.46. The broader S & P 500 index, however, tipped into negative territory.
The dollar remained strong against the euro, but especially against emerging economies which are believed to have most to lose from Trump’s presidency.
US government bond yields rose on expectations of inflationary spending.
‘Catch breath’
Before the stock market’s late slowdown, equities got off to a whopping start Thursday in Asia where Tokyo surged nearly 7%, catching up with a post-election rally elsewhere.
Initially European bourses mostly built on Wednesday’s upturn as they embraced the Trump win “with bullish gusto,” as Mike van Dulken, head of research at Accendo Markets, put it.
But then came the profit-taking.
”People wanted to catch their breath and slow down after yesterday’s exceptional gains,” Andrea Tueni, an analyst at Saxo Banque in Paris, told AFP.
Analysts at Aurel BGC said that Trump’s presumed pro-business stance must now stand the test of reality.
”For the market’s upward trend to continue in the short term, we need something concrete. Investors will need to sift through comments by Trump and by those who are frontrunners for joining his administration,” they said.
In Paris, Vivendi shares were up 9% at the close after the French media conglomerate returned to profit in the third quarter.
But Renault shares reversed 3.65 after a government inquiry into emissions cheating entered a new stage, possibly opening the door to criminal proceedings against the carmaker.
Elsewhere Thursday, oil prices eased back as the International Energy Agency said output by Opec oil producers had reached record levels, raising fears a global crude glut would continue to weigh on markets unless the cartel agrees on a cut.
The Mexican peso, which hit a record low 20.78 against the dollar on Trump’s win, also strengthened somewhat Thursday but remained under pressure owing to fears about Trump’s policy plans.
* Key figures around 1700 GMT (1am Malaysian time)
New York - Dow: UP 0.7% at 18,720.27
New York - S & P 500: DOWN 0.2% at 2,163.09
London - FTSE 100: DOWN 1.2% at 6,827.98 (close)
Frankfurt - DAX 30: DOWN 0.2% at 10,630.12 (close)
Paris - CAC 40: DOWN 0.35 at 4,530.95 (close)
EURO STOXX 50: DOWN 0.4% at 3,067.76
Tokyo - Nikkei 225: UP 6.75 at 17,344.42 (close)
Hong Kong - Hang Seng: UP 1.95 at 22,839.11 (close)
Shanghai - Composite: UP 1.4% at 3,171.28 (close)
Euro/dollar: DOWN at US$1.0897 from US$1.0914 Wednesday
Pound/dollar: UP at US$1.2515 from US$1.2424
Dollar/yen: UP at 106.67 yen from 105.72 yen
Dollar/Mexican peso: UP at 20.32 pesos from 19.82 pesos
Oil - West Texas Intermediate: DOWN 61 cents at US$44.66 per barrel
Oil - Brent North Sea: DOWN 55 cents at US$45.81 - AFP
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