Stock prices in Europe remained in the green at Wednesday midday, as investors digested Donald Trump’s win for a second non-consecutive term as US president.
‘The dollar strengthened and ten-year Treasury yields jumped to 4.406% on the assumption that Trump’s policies will stoke inflation and require interest rates to stay higher for longer,’ commented AJ Bell’s Russ Mould, before the Republican’s victory was confirmed. ‘Trump’s desire to cut taxes and make things easier for businesses to operate should in theory give a near-term tailwind to US shares, with futures prices implying a strong opening to Wall Street later.’
However, he added: ‘The impact of higher inflation on corporate profit margins, and how interest rates might not come down as fast as previously expected, are real risks for investors to consider once the dust settles.’
The FTSE 100 index was up 79.23 points, 1.0%, at 8,251.62. The FTSE 250 was up 199.71 points, 1.0%, at 20,569.75, and the AIM All-Share was up 3.85 points, 0.5%, at 740.14.
‘The FTSE 100 jumped 1.5% in early trading, led by a mixture of industrial, financial and pharmaceutical companies,’ Mould recalled. ‘US-focused Ashtead raced ahead on the prospect of more building work created by Trump’s desire to drive the US economy including greater manufacturing and construction work. As a hirer of construction equipment, it is a direct play on hammers and tools pounding away across the country.’
At midday Ashtead was indeed the index’s biggest winner, gaining 6.2%.
Smith & Nephew meanwhile lost 2.9%.
The medical device company was cut from ’buy’ to ’hold’ by Berenberg earlier on Wednesday.
On the FTSE 250, JD Wetherspoon was up 2.8%.
The pub operator said food and drink sales rose in the 14 weeks to the start of November, outperforming competitors with total sales growth of 4.6% and like for like sales rising 5.7%.
However Wetherspoon warned of rising costs in the coming year, blaming this on the recent UK government budget.
The Cboe UK 100 was up 1.1% at 827.31, the Cboe UK 250 was up 0.5% at 18,105.11, and the Cboe Small Companies was up 0.2% at 16,397.89.
Among smaller companies, Allergy Therapeutics lost 1.1%.
Revenue fell 7.4% to £55.2 million, hurt by ‘supply constraints’ in ‘key markets’ Germany and Spain. However, reduced administrative expenses saw the pretax loss narrow to £39.2 million from £41.8 million the year before.
Elsewhere in the UK, the headline S&P Global construction purchasing managers’ index fell to 54.3 points in October from 57.2 in September, falling short of the 56.0 consensus.
Housebuilding fell into contraction territory, with the sub-index dropping sharply to 49.4 from 54.3 points.
In European equities on Wednesday, the CAC 40 in Paris was up 1.1%, while the DAX 40 in Frankfurt was up 0.7%.
Eurozone business activity performed better than anticipated in October despite demand presenting a drag for service providers.
The HCOB eurozone composite purchasing managers’ output index stood at a neutral 50.0 in October, improving from 49.6 in September. It outperformed the flash reading of 49.7 posted on October 24.
The eurozone services PMI business activity index improved to 51.6 in October from 51.4 in September, indicating growth accelerated. It beat the flash reading of 51.2.
Ireland’s unemployment rate, meanwhile, ticked up a notch in October while September’s was revised downwards.
The jobless rate increased to 4.2% in October from 4.1% in September. However, September’s rate was downwardly revised from a previously reported 4.3%.
The pound was quoted at $1.2853 at midday on Wednesday in London, lower compared to $1.3003 at the equities close on Tuesday. The euro stood at $1.0703, down against $1.0917. Against the yen, the dollar was trading at JP¥154.21, higher compared to JP¥152.08.
Stocks in New York were called higher. The Dow Jones Industrial Average was called up 2.9%, the S&P 500 index up 2.2%, and the Nasdaq Composite up 1.6%.
Brent oil was quoted at $74.50 a barrel at midday in London on Wednesday, down from $76.10 late Tuesday.
Gold was quoted at $2,702.06 an ounce, lower against $2,736.94.
‘Commodities could remain under pressure given Trump’s promise of tariffs on imported goods, especially from China,’ explained StoneX analyst Fawad Razaqzada. ‘Industrial metals could be a particular weak spot and we have seen copper and iron ore being hurt overnight. The stronger USD and yields are also hurting gold as the opportunity cost of holding the non-interest-bearing asset climb.’
Still to come on Wednesday’s economic calendar, there is data on EIA crude oil stocks from the US.
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