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Africa Market and Lombard Fund News
Donald Trump Victorious
09 Nov 2016
Asia: markets regain all of yesterday’s losses with portfolios being rotated from Yield to Cyclicals. Overnight US stocks closed higher after 1000-point swing intraday on the Dow futures. Bond curve steepens as 10y breaks 2.00%. Healthcare, Financials and Materials soar with Copper +5% and Iron Ore +10%. Utilities -2.3% on Bond rout. Volumes were heavy. SOX lower and the jury out on Tech as hiring qualified staff maybe a problem, but overseas repatriation likely to be a one-off gain. DXY 98.50 and EUR 1.093 after 3 big figure move weaker. Nikkei +5.8% and USDJPY 105.3 where it was 24 hours ago and Topix banks index +8% leads with Materials a close second. Index still trading inside yesterday's wide trading range. Australia +2.7% and Rio and BHP +8%.Next Monday likely start of SZ connect and tomorrow Singles Day which should see a huge boost for BABA and Tencent. China has raised margin requirements on Coal trading in a 3rd effort to cool pricesTSMC +3% and Largan +6%.again Steel and Financials lead..and again Index within yesterday's trading range. Korea +1.85 with Posco +5%. Autos -3% on Mexican affiliation plants.. Best Sectors Financials, Materials and Healthcare. Worst Sectors Utilities, REITS and Airlines
U.S Equities: While nobody (except Brexiteers) expected a Trump Victory, even fewer forecasted that it would be accompanied by a clear majority for Republicans in Congress. Much like the pollsters who told us that Hillary would win, most market prognosticators believed that a Trump Presidency would result in a significant selloff. The S&P futures did collapse 5% in the overnight session but clawed back most of those losses by our open and continued to rally into the bell. The unpalatable aspects of Trumps Campaign were made abundantly clear over the past few months, but the fact that he has as majority in Congress will allow them a chance at real economic growth by repealing Obamacare, scrapping 100's of Regulations enacted by Obama, and providing fiscal clarity. On top of that, the tone of his acceptance speech last night stood in stark contrast to that on the campaign trail. In addition to striking a conciliatory tone, Trump outlined the need for significant investment in Infrastructure. The Bond Market was certainly not enamored with the plan as the 10year jumped 22bps to 2.07% while the curve steepened significantly. Metals and Miners loved the news as the Steels jumped 13% and the XME added 8%. The steepening of the curve could prove to be a windfall for the Financials (+4%) and they should also benefit from a reduction in Regulatory Scrutiny. Biotechs (+9%) recouped half of last month’s losses as Trump will not be nearly as focused on the group as Clinton. If Trump follows thru with his anti-globalization stance it will certainly help smallcaps (RTY +3%). Hospitals (-9.5%) were sharply lower as a revocation of the (un)affordable Care Act will mean less hospital visits. Trumps pro-drilling/fracking stance should help Energy Stocks (-1.5%) but will ultimately weigh on Crude. GOLD traded up 2.5% this morning but finished unchanged. We saw significant selling in Mexico (-2.23%) as the Peso collapsed 8%. The Dollar was firmer across the board and that should continue to weigh on Emerging Stocks (EEM-3.26%). The VIX collapsed 24%, the Dow closed within a whisper of its all-time high and market volumes
Commodities: Copper led industrial metals higher, climbing to the highest level in 16 months, on expectations newly elected U.S. President Donald Trump will increase infrastructure spending, boosting demand. Mining and metal stocks jumped, with United Co. Rusal Plc rising the most on record.