Global equities rally on Clinton victory bets – The Australian Financial Review


“I think risk appetite is returning to the market,” said George Gero, a managing director at RBC Wealth Management in New York.

Michael Nagle

Local shares are set to rise amid a global equities rally on bets Hillary Clinton will win the US presidency over Donald Trump. ASX futures were up 13 points; the Australian dollar rose 0.6 per cent to US77.19¢.

The ASX also looks likely to get a boost from mining shares which rallied strongly overnight. In New York, BHP Billiton was up 4.7 per cent, Rio Tinto 4 per cent higher. (With the weekend time change in North America, Wall Street now closes at 8am Sydney time.)

Oil advanced more than 1 per cent after OPEC’s chief said Russia has agreed to limit output. Copper lifted to its highest since March as the greenback advanced on the hopes for a Clinton victory. In addition, coking coal surged to its 10 per cent limit in China trading, once again bolstering prices for iron ore. Shares in BHP Billiton and Rio Tinto charged higher.

“I think risk appetite is returning to the market, and it looks like higher stocks and a higher dollar are helping crude and copper,” said George Gero, a managing director at RBC Wealth Management in New York.

Optimism over a Clinton win was reinforced by a swag of polls.

The final Bloomberg Politics national poll before the election has the Democrat ahead of Trump, 44 per cent to 41 per cent, when third-party candidates are included. In a two-way contest, she’s also up by three points. 

Clinton led Trump by 6 percentage points among likely US voters in a Monmouth University poll. The survey of 802 registered voters found 50 per cent backed Clinton while 44 per cent supported Trump, with a margin of error of plus or minus 3.6 percentage points, the university said in a statement. Its last poll released on October 17 found Clinton up by 12 points, it said.

Several other national opinion polls showed Clinton with a 3-point or 4-point advantage.

Today’s Agenda

Local data: NAB business survey Oct, ANZ Roy Morgan consumer confidence weekly

Chris Ryan, Head of the RBA’s International Department is speaking at an Asian Regulatory Summit in Hong Kong

Overseas data: US elections; China trade Oct; German industrial production Sept, UK industrial production Sept

Market Highlights

SPI futures up 13 points or 0.2% to 5253

AUD +0.6% to 77.19 US cents

On Wall St, Dow +2.1%, S&P 500 +2.2%, Nasdaq +2.4%

In New York, BHP +4.7%, Rio +4%

In Europe, Stoxx 50 +1.9%, FTSE +1.7%, CAC +1.9%, DAX +1.9%

In London, BHP +4.8%, Rio +3.6%

Spot gold -2% to $US1279.59 an ounce

Brent crude +1.1% to $US46.09 a barrel

Iron ore +3.7% to $US67.43 a tonne

LME aluminium flat at $US1721.50 a tonne

From Today’s Financial Review

Shares set for gains with a Clinton win: Investors have got so worked up about a Trump victory that they have forgotten it is Clinton leading the polls.

Inside the Trump campaign’s final days: The two sides of Donald Trump’s candidacy: the confident choreographed show and a once-boastful candidate now uncertain of victory.

Westpac warning on deposit funding: Why Westpac investors can take heart from CEO Brian Hartzer’s admission his team was distracted from making profits in 2016.

United States

The S&P 500 Index rallied 2.2 per cent to 2131.37, erasing its November losses. The measure of market turbulence known as the VIX slid 16 per cent after surging 39 per cent last week. JPMorgan Chase & Co and Microsoft Corp advanced more than 2.9 per cent, while Biogen led gains in health-care stocks.

“We’ve been down nine straight days as concerns over a potential Trump victory put a lot of caution in the market,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles. “Some of that is being relieved with the comments from the FBI about the Clinton email investigations. All today guarantees is that there will be more volatility for the rest of the week following tomorrow’s election.”

Regardless of how prices react on November 9, next-day moves in the S&P 500 are useless in telling what comes after. While the index swings an average 1.5 per cent the day after the vote, gains or losses over the first 24 hours predict the market’s direction 12 months later less than half the time, according to Bloomberg.

News Corp, the owner of the Wall Street Journal, Dow Jones Newswires and book publisher HarperCollins, reported a 2.4 per cent fall in quarterly revenue as it struggles to cope with a decline in newspaper advertising revenue. The company, controlled by media mogul Rupert Murdoch, said its revenue fell to $US1.97 billion in its first fiscal quarter ended September 30 from $US2.01 billion a year earlier.

Europe

A HSBC Holdings-led rally in lenders helped pace a rebound in European shares after their worst week since February. 

Europe’s largest bank climbed 4.6 per cent after posting a surprise jump in adjusted profit and a regulatory decision boosted its key capital ratio. Glencore and Antofagasta rose 5.6 percent or more, pacing miners to the best performance among industry groups in the Stoxx Europe 600 Index as commodities from oil to steel advanced. PostNL added 3.8 per cent after Belgian mail service Bpost revived its approach to its Dutch counterpart.

The Stoxx 600 jumped 1.5 per cent to 333.84 at the close of trading, for its biggest advance since October 18. The equity gauge on Friday capped its 11th consecutive day without gains for the first time since 1994 after a particularly difficult week dominated by angst about the outcome of the US presidential election.

The Stoxx 600 is still trading close to a four-month low amid investor scepticism toward the region.

Ryanair Holdings rose 5.1 per cent, the most since July, after announcing plans to buy back as much as €550 million of stock after record passenger numbers over the summer helped second-quarter profit beat analyst estimates. Ferrari NV jumped 6.8 per cent after raising its 2016 profit target as third-quarter earnings beat estimates on initial deliveries of the $US2.1 million LaFerrari Aperta.

Asia

NAB: “China’s trade figures for October are out at midday Sydney time. Focus is likely to be on the export numbers (-0.8%yoy exp.) after both the official and CAIXIN PMIs hinted at a softening in external demand. Notably as well, the trade balance is an important piece to China’s capital flow story. The market is expecting a trade surplus of $51.7bn and if correct it would confirm capital outflows from China have continued at decent pace against a weaker RMB backdrop.”

The Hang Seng Index gained 0.8 per cent even as real estate companies fell after Hong Kong chief executive Leung Chun-ying raised the stamp duty for all residential purchases, apart from first-time buyers who are permanent residents, after markets closed on Friday. Louis Chan, chief executive of the residential unit of Centaline Property Agency, said he sees transaction volumes plunging by 60 per cent to 70 per cent in the next three months.

Political risk may also weigh on Hong Kong shares this week. China’s National People’s Congress Standing Committee ruled on Monday that Hong Kong people who advocate independence can’t hold public office, according to a document published by the official Xinhua News Agency, a rare intervention that lawyers and democracy advocates have warned could undermine the courts and spark unrest. The decision by the committee represented only its second unilateral interpretation of Hong Kong law since the former British colony was returned to China almost two decades ago.

The Shanghai Composite Index gained 0.3 per cent, reversing earlier losses of as much as 0.3 per cent.

The benchmark Topix index climbed 1.2 per cent, the most in almost seven weeks at the close of trading, after posting its worst weekly performance since July. The Nikkei 225 advanced 1.6 per cent. The yen fell the most against the dollar in more than a month.

“The ‘President Trump risk’ has receded, and market sentiment is getting back to normal,” said Toshiyuki Kanayama, a Tokyo-based senior market analyst at Monex. “With the letter from the FBI we’re heading toward the conclusion that there’s no problem over Clinton’s private e-mails. With expectations of increased support for her, it’ll be easier for investors to buy stocks.”

Currencies

NAB: “The AUD has benefited from the boost in risk appetite as the VIX index dropped from 22.5 on Friday to 18.67 currently and commodities have also posted decent gains. The AUD has steadily risen through the overnight session, it is the best G10 performer against the USD (up 0.42%) and it is currently trading at 0.7716.”

China’s forex reserves extend slump: China’s foreign exchange reserves, which peaked at US$4tn in 2014, have taken a big hit this year.

Hedge Trump, dump the krona: Betting against Sweden’s krona is the best way for European traders to protect against Donald Trump.

Mexico’s peso led gains among the world’s major currencies. It has been among assets tending to strengthen when Trump loses momentum as he’s pledged to renegotiate the North American Free Trade Agreement and build a wall along the US border with Mexico.

The Bloomberg Dollar Spot Index, which measures the US currency against a basket of 10 major counterparts, rose 0.4 per cent, following a six-day decline. The greenback advanced 1 per cent to $US1.1031 per euro, and 1.4 per cent to 104.56 yen.

“Our base case is that Clinton wins and the dollar strengthens” into the Federal Reserve meeting in December, said Robert Rennie, head of financial-markets strategy in Sydney at Westpac Banking Corp.

Commodities

Russia ready to limit output: Russia is “on board” with a plan to limit crude oil production, OPEC’s Mohammed Barkindo says.

Russia published a government decree on Monday ordering the sale of a 19.5 per cent stake in state-controlled oil giant Rosneft in time for the proceeds to be received by the end of the year.

Chinese iron ore futures were trading close to their highest in more than two years as a surge in coal prices lifted demand for higher-grade iron ore. Coking coal prices are at their highest in almost half a decade.

Coking coal surges by 10pc limit: ​The price of coking coal and coke, the raw materials used to make steel, surged amid tight supply.

Copper reached its highest price since March. Benchmark copper on the London Metal Exchange rose 1 per cent to $US5042 a tonne, having touched $US5095, the highest since March 18.

Supporting copper are moves in China to lift power investments by 83 per cent over the 2016-2020 Five-Year Plan, according to Argonaut analyst Helen Lau.

Elsewhere, nickel hovered near levels last seen in August 2015, bid up 5 per cent to $US10,985 a tonne as traders covered short positions.

Zinc reached five-year highs in official rings at the LME. It was up 0.9 per cent at $US2470 a tonne on expected supply deficits.

Tin added 0.8 per cent to $US21,475, lead was bid up 0.3 per cent to $US2107 and aluminium was barely changed at $US1721.50.

Australian Sharemarket

Australia’s share market had its best day in fourth months and the rest of Asia rallied as the FBI backed off Hillary Clinton and investors bet she was set to become the first female president of the United States.

The FBI’s reaffirmation on Monday that Hillary Clinton had not broken criminal laws using a private email system as secretary of state removed uncertainty plaguing her campaign, belatedly boosting the Democrat ahead of the pivotal US election.

It also cheered investors and traders, with the S&P/ASX 200 Index closing up 1.4 per cent higher at 5250.8 points and the All Ordinaries ahead 1.3 per cent higher at 5330.9.

Clinton could keep boosting oversold ASX: The ASX is looking oversold after its three week slump, and investors are preparing for better times.

Street Talk

Regal closes pre-IPO fund: Brokers with pre-initial public offering raisings will head straight to Regal Funds Management.

Slater & Gordon debt trades at 38 cents in the dollar: sources: No-one in the market wants to have much to do with law firm Slater & Gordon just at the minute.

HPS mandates Goldman Sachs to run early 2017 dual-track: Blue Sky Private Equity and Partners Group-backed pharmacy group HPS has hired Goldman Sachs to prepare the company for a dual-track sale.

 

with Reuters, Bloomberg, AAP

Comments? Questions? Let us know what you think of Before the Bell. You can reach Timothy Moore at  timothy.moore@fairfaxmedia.com.au

LEAVE A REPLY

seven − five =