NEWS
11/09/2016 12:17 EST | Updated 11/10/2017 00:12 EST

Stock markets rise as investors warm to idea of Trump U.S. presidency

TORONTO — Canada's biggest stock market rose while Wall Street hovered around record levels Wednesday, as investors warmed to the idea that the victory of U.S. president-elect Donald Trump will be good news to business on both sides of the border.

The optimistic tone helped push the resource-heavy S&P/TSX composite index higher by 103.07 points at 14,759.91, led by a strong rally in the gold, metals and materials sectors.

The bounce in the stock market came as a surprise as most had been expecting a gloom and doom scenario if the brash, billionaire clinched the White House over Democrat candidate Hillary Clinton.

But at the open, the picture that emerged was one of cautious hope on Bay Street and Wall Street.

"This is the best case scenario for how the markets are reacting," said Kathryn Del Greco, a vice-president and investment adviser at TD Wealth.

"We were certainly expecting — fearing — a significant sell-off in the market as a result of... a new president that is an unproven entity in political life. The market does not like uncertainty."

Del Greco attributed the positive reaction to Trump's victory speech which reassured and calmed markets with its "softer tone."

On the TSX, the metals sector racked up the biggest gains, climbing by 4.23 per cent as the December copper contract surged eight cents to a 15-month high of US$2.46 a pound. Investors were anticipating that there will be growing demand for the metal if Trump sets off with his large infrastructure building plans.

Energy companies also climbed 1.99 per cent on the TSX, as investors interpreted the Republican's policies on oil as ones that were much more friendlier than those of the previous administration.

Among the biggest losers were forestry and manufacturing companies, including several B.C. lumber producers and Ontario-based auto parts manufacturers, as questions were raised about whether the president-elect will make changes to free-trade agreements.

"It's uncertain going forward how the market will interpret this president-elect," she said. "The road map to the future will depend on Trump's transition team, who he appoints to top cabinet positions… and whether his message is going to be one that focuses on fiscal easing, deregulation and tax reform. That type of dialogue and platform will be very positive for the marketplace."

In New York, the Dow Jones industrial average climbed 256.95 points to 18,589.69, just shy of an all-time closing record. It was in sharp contrast to futures trading which saw the Dow sink by 750 points at midnight.

The broader S&P 500 gained 23.70 points at 2,163.26, while the Nasdaq composite rose 57.58 points to 5,251.07.

Colin Cieszynski, chief market strategist at CMC Markets Canada, said markets showed their resiliency. Most were bracing for drastic fallout post-election similar to that of the Brexit vote, when Britain unexpectedly voted to leave the European Union in June. 

He noted that markets continue to anticipate that the U.S. Federal Reserve still remains likely to hike interest rates in December, despite the surprise outcome of the election.

If the markets stay stable, it will be another reason for the central bank to move on rates sooner rather than later.

"Even if they don't do anything good to help the (energy) sector immediately, at least the threat of them being on the attack against the sector goes down, as a minimum," he said.

"Another way to look at it is that things can't possibly get any worse, can they?"

The Canadian dollar was down 0.41 of a U.S. cent to 74.75 cents US, against a strengthening U.S. greenback.

Crude oil added 29 cents to US$45.27 a barrel, after trading lower for most of the day. December natural gas jumped six cents to US$2.69 per mmBTU.

Gold, which is often considered a safe haven in times of global turbulence, pulled back on some of its earlier gains with the December bullion contract fading $1 to US$1,273.50 an ounce.

 

Follow @LindaNguyenTO on Twitter.