Friday, 11 November 2016

FTSE rises again, boosted by potential stimulus expectations

Britain's top share index rose on Thursday, led higher by miners and construction stocks amid expectations of a big economic stimulus in the United States based on President-elect Donald Trump's pledges of tax cuts and more infrastructure spending.

Britain's FTSE 100 .FTSE rose 0.8 percent, up for its fourth straight session to its highest level since late October.

Copper miner Antofagasta  rose 9.4 percent. The mining, industrial metals, construction and materials sectors rose 2.7-7.1 percent.

Copper prices jumped to the highest levels in more than a year on the back of Trump's infrastructure spending promises, while bond yields also rose as his policies are seen as inflationary.

"The Republican dominance of the next U.S. government increases the likelihood that inflation will be higher in the coming year, and even growth might receive a boost from more government spending and tax cuts," strategists at Julius Baer said in a note.

"We believe the rally (in metals) was primarily driven by bets on Trump's promise to massively boost U.S. infrastructure spending."

Defence firm BAE Systems  rose 6.8 percent as traders bet that European governments might increase arms spending after Trump's win. Trump has said he might not be willing to protect NATO allies that failed to spend enough on their own defence.

Markets are also betting that the U.S. Federal Reserve will still hike rates in December in the wake of Trump's election.

Banks rose, with Barclays (BARC.L), which has substantial U.S. exposure, up 4.4 percent, as higher interest rates stand to ease concerns over bank profitability..

"The outlook for interest rates has been muddied by the Donald Trump victory, but markets continue to price in a December rate hike from the Federal Reserve," said Jasper Lawler, market analyst at CMC Markets.

One stock which is set to benefit from higher rates in the United States is insurer Prudential .

It rose 6.9 percent after it agreed to sell its life insurance unit in South Korea.

Safe haven plays that surged in the turmoil around the U.S. presidential election dropped back, with precious metals miners Randgold  and Fresnillo  down 5.1 percent and 3.8 percent as gold steadied.

Top faller was Mediclinic (MDCM.L) after poorly-received results. Earnings were hit after the acquisition of Al Noor negatively affected its operating profit.

Reference: Alistair Smout

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