Healthcare and gold stocks are among the few stock market winners of a Donald Trump victory in the US presidential election.
Shares in the FTSE 100 opened only marginally lower despite losses in excess of 5% on Japan’s Nikkei overnight. Futures markets for the S&P 500 also perked up on a Trump victory speech which focused on bringing the US together and potential infrastructure spending.
Markets are also pricing a lower chance of a Federal Reserve interest rate increase in December following the election outcome, staving off a harsher market reaction.
INTEREST RATES ON HOLD
'The uncertainties unleashed by this election outcome are likely to derail the much anticipated US rate increase at the December FOMC meeting,' says Peter Hensman, global strategist, real returns, at Newton Investment Management.
'US political uncertainty and the lowered prospects for tighter monetary policy can be expected to undermine the dollar against the other major currencies. The Japanese yen perhaps stands out as the currency most likely to benefit from this flight to quality.
'Next to watch is Trump's selection for key cabinet positions. These choices may be calming or may invoke more concern.'
PRECIOUS METALS SURGE
Gold stocks Fresnillo (FRES) and Randgold Resources (RRS) were the biggest gainers at the open in London as gold prices gained 2% to $1,303 (£1,048) an ounce.
Precious metals are often seen as a haven in times of market uncertainty.
Specialty drugs play Shire (SHP) jumped 5% and UK healthcare national champions GlaxoSmithKline (GSK) and Astrazeneca (AZN) perked up around 2% each in early trading because Hillary Clinton’s stance on health care was seen as a potential negative for the sector.
UK technology stocks also buck the weak wider market trend with the TechMark 100 index firmly higher. The TechMark, which measures the UK's biggest 100 UK technology companies, rallies around 35 points, or roughly 0.8%, to 4,210.
The index includes some pharmaceuticals stocks as well as the UK's largest defence contractor BAE Systems (BA.), up 3.7% to 568p. Gains at BAE reflect Trump's commitment to defence spending and a potentially more uncertain geo-political backdrop.
BANKS, OIL, CONSUMER STOCKS STRUGGLE
Financials were among the bigger losers on the back of the election result and pushed the FTSE 100 around 1% lower.
HSBC (HSBA), the UK’s largest-listed lender, was the biggest drag on the UK blue chip benchmark, down 2.3% at 605p, as financial stocks across Europe struggle.
In Frankfurt, Deutsche Bank sheds another 4%, while Italy’s struggling Banca Monte Paschi dips almost 10%.
Oil majors BP (BP.) and Royal Dutch Shell (RDSB) are off their lows, down 1.4% and 1.9% respectively, as oil pares some of its earlier losses.
Global consumer goods giants are weighing on the FTSE 100 index as investors fret over the possible impact on consumer spending and global growth.
Luxury goods leader Burberry (BRBY) sheds 2.3% at £14.47 as it reports a drop in first half profits and investors digest the potential impact on US sales of a Trump victory. Elsewhere, Gaviscon-to-Strepsils supplier Reckitt Benckiser (RB.) cheapens 1.1% to £70.64 and international packaged consumer goods group Unilever (ULVR) is off 29p at £33.53.
BAT-REYNOLDS TIE-UP UNDER THREAT?
Cigarettes titan British American Tobacco (BATS) runs out of puff with a 1.5% fall to £45.08. The stock may be under pressure as markets ponder whether its big money acquisition of US peer Reynolds American (RAI:NYSE) will attract further scrutiny under the Republican president.
Advertising giant WPP (WPP), often seen as a good bellwether for the economy, slips 1.6% to £16.99, again off its lows earlier this morning.
US focused promotional products provider 4imprint (FOUR), down 9.7% to £14.99, is a notable small cap faller. The company is heavily exposed to the fortunes of the US economy.
SILVER LINING
While most of today's stock market moves are to the downside, there could be a silver lining in the result, says Christian Gattiker, chief strategist at Swiss private bank Julius Baer.
'While financial markets are currently gripped by the uncertainty related to the change in US economic policy, the upside of the landslide election will sink in over the coming days and weeks,' says Gattiker.
'Hence as a seasoned reality TV star, Donald Trump will start the role of the elder statesman as of today. This means closing ranks, assuring the other half of voters that they will not be lost, and starting to nominate the team.
'Furthermore the prospects of a major reflationary push with tax cuts and infrastructure spending will support the prospects of reasonable growth and job creation in 2017.
'As for the economy and monetary policy, the recent decision is not derailing current trends. The US economy is solid and if anything re-accelerating. At the same time, monetary policy remains supportive with a very gradual data-depending tightening the next twelve months.'
A contributor to this article owns shares in BP, BAE and BAT
