Donald Trump’s unlikely rise to power is providing a shot in the arm for global financial markets, with stocks and metals rallying on optimism that his fiscal-stimulus plans will boost the economy. Bonds tumbled.
Energy companies led U.S. stocks mostly lower in early trading Friday as the price of crude oil fell and several retailers reported disappointing quarterly results. Utilities and consumer product stocks bucked the broader downward trend. The market was coming off a post-election rally that pushed the Dow Jones industrial average to a new high a day earlier.
The MSCI All Country World index erased its monthly decline and the Dow Jones Industrial Average climbed to a record high.
Copper posted its biggest back-to-back surge in three years, gaining alongside lead, zinc, tin and aluminum.
The dollar rose against most major peers, while government bonds extended their selloff as Trump’s win bolstered bets on faster inflation.
Latin American equities, debt and currencies plunged on speculation that higher U.S. interest rates would damp the appeal of riskier emerging-market securities.
Traders are betting Trump will lower taxes, ease corporate regulation and ramp up spending to spur the world's largest economy. He’s pledged to at least double the $275 billion five-year building plans of Democratic rival Hillary Clinton, while saying infrastructure will become “second to none” with millions working on projects.
A statement posted on the president elect’s official transition website said the new administration will replace the Dodd-Frank Act financial-sector law with pro-growth policies.
“People are going through the possibilities about what Washington looks like today and what Washington can do or not do for them,” said John Manley, who helps oversee about $233 billion as chief equity strategist for Wells Fargo Funds Management in New York. “Corporations feel there’s a less restrictive hand. People may take that as a positive.”
Meanwhile, Federal Reserve Bank of St. Louis President James Bullard and his San Francisco counterpart John Williams stressed the importance of the central bank’s independence from political influence.
Questions remain, however, over Trump’s attitude toward Chair Janet Yellen, whom he accused of holding rates low to aid Democratic President Barack Obama. Traders see an 84 percent chance of a rate hike next month, according to federal funds futures pricing.
“I am not seeing enough volatility here to change my basic projection for the economy,” Bullard said Thursday. “I think we are basically on track, the same way we were before the election. Our view has called for a single rate increase and I think December would be a reasonable time to implement that increase.”
The Associated Press contributed.