Donald Trump’s unexpectedly decisive victory in the US presidential election provided a boost for global stock markets
Share prices in America rose to record highs in the wake of the Republican’s success in Tuesday’s poll.
While the reaction elsewhere in the world was not quite as enthusiastic, investors appear relieved that the unambiguous outcome will not lead to weeks of legal or political wrangling in the US – much less a repeat of the scenes of 6 January 2021 when Trump supporters stormed the Capitol building in Washington DC.
The only uncertainty now relates to whether Trump will press ahead with the more extreme economic policies floated during the campaign. For example, plans to impose tariffs on a wide range of imported goods, if enacted, could lead to significant price rises in the US and force policymakers to raise interest rates once again. The introduction of trade barriers would also have a significant impact on countries that are major exporters to the US, not least the larger European economies as well as the likes of Mexico and China.
United States
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 4% up for the week so far, with the S&P 500 gaining 4.3% to reach yet another all-time high. For once, a Federal Reserve decision to cut interest rates was not the main topic of conversation during the week. As had been widely expected, the Fed delivered a 0.25% reduction on Thursday, but chair Jerome Powell said it was too early to predict exactly how the new president’s policies would affect financial markets. Trump seems set to inherit an American economy that is in robust health, with latest data indicating continued strength in both the services sector and the jobs market.
UK
In the UK, the FTSE 100 closed on Thursday 0.4% down for the week so far despite the Bank of England making its own quarter-point rate cut. The inflationary impact of the measures announced in last month’s Budget has forced investors to temper their expectations of further base-rate reductions, while sentiment was also hit by fears of a potential drag on UK growth from Trump’s tariffs. The latest economic figures showed a slowing of expansion in the services sector in October, largely as a result of pre-Budget uncertainty. Meanwhile, lower borrowing costs in recent months helped house prices in Britain reach a record high.
Europe
In Frankfurt, the DAX index ended Thursday’s session up 0.6% for the week, while France’s CAC 40 gained 0.2%. Share prices across Europe have performed surprisingly well this week, despite a slew of negative headlines. Although the German market slumped on Wednesday on fears that tariffs in the US could threaten the country’s motor manufacturers, among other sectors, stocks bounced back the following day as investors started to question whether President Trump would follow through on his protectionist proposals. The apparent collapse of the ruling coalition in Germany, meanwhile, did little to dent market sentiment. The likelihood that interest rates in the western world would stay near to their current levels for longer than previously expected helped banking stocks outperform as the week wore on.
Asia
In Asia, the Hang Seng index in Hong Kong gained 2.2% despite the threat posed by potential tariffs on imports into the US. Share prices were buoyed by data published on Thursday that showed a sharp rise in Chinese exports in October, apparently as a result of manufacturers’ efforts to ship goods ahead of possible changes in US trade policy. Japan’s Nikkei 225 index of leading shares, meanwhile, advanced 3.5% as Tokyo-listed companies reaped a significant benefit from the surge in the US dollar against the yen in the wake of the US election result. A weakening yen increases the relative value of the overseas earnings generated by Japan’s numerous multinationals, and tends to drive share prices higher.
November 1 | November 7 | Change (%) | |
|---|---|---|---|
FTSE 100 | 8177.2 | 8140.7 | -0.4 |
FTSE 250 | 20479.7 | 20635.4 | 0.8 |
S&P 500 | 5728.8 | 5973.1 | 4.3 |
Dow Jones | 42052.2 | 43729.3 | 4.0 |
DAX | 19255.0 | 19367.6 | 0.6 |
CAC 40 | 7409.1 | 7425.6 | 0.2 |
ACWI | 835.2 | 862.6 | 3.3 |
Hong Kong Hang Seng | 20506.4 | 20953.3 | 2.2 |
Nikkei 225 | 38053.7 | 39381.0 | 3.5 |
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 7 November 2024.
