Healthcare and Mining Stocks Gain On Trump Win

FTSE 100: Mining, healthcare and building stocks rallied in London this morning as news of Donald Trump's US presidency crossed the pond

Karen Kwok 9 November, 2016 | 12:25PM
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Miners, healthcare and building stocks jumped in value this morning, following the news that Republican candidate Donald Trump had secured a victory in the US presidential election. UK supermarket stocks were among the biggest losers.

Ahead of the US election result, global stock markets appeared to be pricing in a victory for Democratic nominee Hillary Clinton. The S&P 500 and European markets rallied on Monday and Tuesday to reflect this confidence. But Trump’s victory this morning, has created global uncertainty.

“The markets face uncertainty due to the president-elect’s relative lack of public sector experience, and intended policies that could generously be described as unconventional,” said HyungJin Lee, head of Asian equities at Barings the asset management firm.

While both European and North American markets were closed as the US election results rolled in, Asian stocks were trading. As a result, Asia Pacific markets felt the initial shock of Trump’s victory. Japan’s Nikkei dropped more than 5%, alongside most of the major markets in Asia. The Paris market opened 2.9% lower and Germany’s DAX was down 2%, however European markets have regained their earlier losses. The FTSE 100 opened 1.4% lower however it has subsequently recovered.

As the FTSE 100 opened at 8am for the day’s trading, financial stocks Prudential (PRU), Barclays (BARC), Standard Life (SL.) and Standard Charted (STAN) all suffered from 4% losses. Within an hour they regained some of their earlier losses. Instead the analytic company Experian (EXPN) became the biggest loser. The company lost 5% down to 1440p at first hour trading. As 75% of the company’s revenue generates within North America and the UK, the company will be sensitive to US economic uncertainty.

Supermarket stocks also suffered losses, with Sainsbury (SBRY) and Marks & Spencer (MKS) both losing 5% by 11am.

Healthcare Gains as Clinton Presidency Hopes Faded

At the opening of the trading day for the FTSE 100, healthcare stocks led gains as the likelihood of a Hillary Clinton presidency diminished. Clinton promised to fight drug price hikes in campaign, which led to the devaluation of pharmaceutical stocks earlier this year.

Trump’s plan to repeal the Affordable Care Act, also called Obamacare, could end up being “modestly positive” for healthcare stocks, said Ziad Bakri, portfolio manager at T. Rowe Price.

With a confirmation of a Trump victory in the US election, biotech firms AstraZeneca (AZN) gained 2.9% at the FTSE 100 opening to 4580p while Hikma Pharmaceuticals (HIK) rose 7.1% to 1697p. Another biotech company Shire (SHP) also gained 1.6% to 4595p while GlaxoSmithKline (GSK) was up 1.2% to 1575p.

Within an hour of trading Hikma Pharmaceuticals rose 7.1% to 1781p and AstraZeneca rose 4.5% to 4648p. Shire and GlaxoSmithKline also continued their gains at 5.2% and 2.7% respectively.

Gold Price Jump Pushes Miner Stocks Higher

Shares of gold and mining companies also recorded a rally amid increasing demands for gold as a investor safe haven. Gold miners Fresnillo (FRES) gained 11.4% to 1782p within the first hour of FTSE 100 trading while Randgold Resources (RRS) rose 6.4% to 7210p. Another miner company Antofagasta (ANTO) was also up 5% to 618.5p. Polymetal International (POLY), a Russia-based miner gained 5.8% to 960p within the first hour of FTSE 100 trading as well.

The uncertainty and volatility in financial markets following the US election outcome saw the gold price run to four-week high at $1,302 per ounce.

The gold price started to jump as Trump took the lead overnight, gaining more than 4% against the falling US dollar as Asian stock markets fell up to 5%, according to Adrian Ash, head of research at BullionVault, the online metal trading platform.

“Given the political uncertainty introduced by the election results, we expect to see continued market volatility during the coming weeks”, said Karen Dunn Kelley, Invesco’s senior managing director of investments.

If Trump’s victory creates longer-term volatility, it will cause a significant flight to safety to assets such as gold, then the Indonesian and other Southeast Asian markets and currencies could be negatively impacted, as has been the case in the past, Barings’ Lee added.

Gains on Builders and Defence Stocks

While many of Trump’s policies are yet to be made clear, both Democratic and Republican parties have recognised the need to rebuild and upgrade the US’s infrastructure, such as aging roads, bridges and power grids, said Kelley.

Republicans in general are considered to be pro-defence as well, said Angel Agudo, portfolio manager of the Bronze Rated Fidelity American Special Situations.

As a result, within the FTSE 100 space, builders CRH (CRH) rose 6.9% and Ashtead Group (AHT) gained 8.7% at 11am. Defence operation company BAE Systems (BA.) was also up 4%.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
abrdn PLC137.30 GBX0.96
Antofagasta PLC1,808.50 GBX4.75
Ashtead Group PLC6,332.00 GBX0.51Rating
AstraZeneca PLC9,725.00 GBX-1.99Rating
BAE Systems PLC1,382.00 GBX2.90Rating
Barclays PLC253.85 GBX-1.67Rating
CRH PLC7,832.00 GBX0.31Rating
Experian PLC3,868.00 GBX0.81Rating
Fidelity American Special Situations2,739.38 GBP1.20Rating
Fresnillo PLC711.00 GBX1.72
GSK PLC1,380.00 GBX0.69Rating
Hikma Pharmaceuticals PLC1,801.00 GBX1.64
Marks & Spencer Group PLC393.20 GBX-1.26
Polymetal International PLC  
Prudential PLC671.60 GBX1.18Rating
Sainsbury (J) PLC256.80 GBX-4.11Rating
Standard Chartered PLC938.40 GBX-0.47Rating

About Author

Karen Kwok

Karen Kwok  is a Reporter for Morningstar.co.uk

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