Oil rises, investors exuberant as Trump signals shift

Oil and European stocks rose on Thursday following Asia gains and Wall Street poised for gains as exuberance affects markets and reversed initial dives following Donald Trump’s victory.

Brent crude oil added to overnight gains made on the post-U.S. election surge in global markets, rising 0.47 per cent to 46.60 dollars a barrel.

Investors focused on Trump’s priorities including tax cuts and higher infrastructure and defence spending along with bank deregulation.

Financiers are set aside for the moment longer-term worries about whether he will slap punitive tariffs on Chinese and Mexican exports, risking a global trade war.

European stocks hit a two-week high, with the pan-European index up 1.3 per cent in early dealings before trimming gains to around 0.7 per cent.

The “safe haven” government bonds sold off after Trump suggested he would spend billions on infrastructure.

This marked an abrupt change from the sharp recoil on markets on Wednesday after the Republican candidate’s triumph.

U.S. futures pointed to more gains when Wall Street opens, with the S&P 500 Futures up about 0.6 per cent.

The dollar also jumped to its highest level in two weeks.

However, amid the optimism came a warning from PIMCO, the world’s largest bond fund, that volatility is likely to be high in the immediate future.

Generally, however, investors saw signs that Trump will ditch the budget austerity policies that Western governments have pursued since the 2008 global financial crisis after he takes over in January.

“Trump’s speech following the victory was hugely influential in yesterday’s sudden U-turn, as he focused more on unity and the need to spend to get the economy growing again.

“These policies combined with his desire to deregulate and lower taxes are all very market-friendly,” said  senior market analyst at OANDA, Craig Erlam.

“The stance he takes on trade will likely determine how vulnerable the markets are, but in reality these are very long-term policies.

“For now, markets are more focused on the prospect of lower taxes, fiscal stimulus and less regulation.”

The three major U.S. stock indexes rose on Tuesday and the dollar index against major currencies recovered from a trough of 95.885 plumbed on Wednesday to around 98.787 on Thursday.

Trump’s conciliatory tone boosted market expectations that the Federal Reserve will raise U.S. interest rates in December and supported dollar strength.

The euro hit a two-week low of 1.0890 dollars, near its lowest since Oct. 28, and later was at 1.08810 dollars.

In a remarkable session for Japanese shares, the Nikkei jumped seven per cent at one point after sinking five per cent on Wednesday.

High-rated euro zone bond yields rose sharply on Thursday, with the region’s benchmark German 10-year bonds up 9 basis points to 0.27 per cent, the highest level since April.

Trump’s victory and opening comments have sharpened a debate about the austerity consensus that has prevailed across most of the developed world since the financial crisis.

If his actions match his rhetoric, it seems likely that many indications would change.

Trump’s administration will test the theory of whether central banks’ cuts in interest rates to ultra-low levels and money printing should be replaced by budget measures to boost the world economy.