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| Pound has best fortnight in eight years after Trump win | Pound has best fortnight in eight years after Trump win |
| (35 minutes later) | |
| The battered pound has notched up its best two-week performance in eight years after the surprise US election result took investor focus off the UK’s Brexit challenges. | The battered pound has notched up its best two-week performance in eight years after the surprise US election result took investor focus off the UK’s Brexit challenges. |
| Market concerns shifted to the euro amid fears that Donald Trump’s victory will trigger a wave of populism and political uncertainty throughout Europe. | |
| Measured against other currencies, sterling enjoyed its best fortnight since 2008. It remains well below pre-referendum levels, but on Friday managed to push above $1.26 for the first time since early October. That will soothe concerns over a weak currency pushing up import costs and stoking inflation. | |
| While the pound rebounded, the FTSE 100 share index fell by more than 1% for the second day running, erasing all the gains made on the day of Trump’s win. | |
| That capped a tumultuous week for financial markets as investors proffered diverging views over what a Trump presidency would mean for US growth, global trade and individual shares. Debate raged over whether a big spender in the White House would boost economic activity and inflation in the world’s leading economy or whether his anti-trade stance would curb growth around the globe. | That capped a tumultuous week for financial markets as investors proffered diverging views over what a Trump presidency would mean for US growth, global trade and individual shares. Debate raged over whether a big spender in the White House would boost economic activity and inflation in the world’s leading economy or whether his anti-trade stance would curb growth around the globe. |
| There was also uncertainty over how his campaign trail rhetoric would translate into clampdowns for some sectors, such as technology companies and other internationally focused firms, and into deregulation for others, including energy and banking. | There was also uncertainty over how his campaign trail rhetoric would translate into clampdowns for some sectors, such as technology companies and other internationally focused firms, and into deregulation for others, including energy and banking. |
| Amid all the confusion, the pound was a a clear outperformer. Against the euro it was up 0.75% to €1.1608. | Amid all the confusion, the pound was a a clear outperformer. Against the euro it was up 0.75% to €1.1608. |
| Analysts offered various explanations for its rebound this week. “There may be some hopes that Trump’s election victory could put the UK at the front of the queue for a post-Brexit trade deal with the US, although at the very least this week’s events have shifted the focus away from the UK’s impending departure from the EU,” said Chris Saint, a senior analyst at the financial firm Hargreaves Lansdown. | Analysts offered various explanations for its rebound this week. “There may be some hopes that Trump’s election victory could put the UK at the front of the queue for a post-Brexit trade deal with the US, although at the very least this week’s events have shifted the focus away from the UK’s impending departure from the EU,” said Chris Saint, a senior analyst at the financial firm Hargreaves Lansdown. |
| Jasper Lawler, a market analyst at the spread-betting and trading firm CMC Markets, also highlighted hopes of a UK trade deal with the US as well as other factors. “On the EU side, there is rising concern that upcoming elections, starting with the Italian referendum next month, mean it is the next target for the rise in populism,” he said. | |
| “The British pound as a top foreign-exchanges gainer this week bucks the trend of Brexit-induced weakness seen over the past few months. There’s an element of simply a shift in focus behind this. The phenomenon of Donald Trump as US president-elect has put Brexit on the back-burner, allowing the pound to creep higher.” | |
| On the FTSE 100 index, the pound’s recovery put pressure on those companies that report in dollars. They had been bolstered in recent months from sterling’s slump as it flatters their finances and also increases competitiveness for UK firms that export. | |
| On Friday the blue-chip index closed down 1.4%, or 97.6 points lower, at 6,730.43. Firms exposed to emerging markets were among the biggest losers as investors fretted over how Trump’s anti-trade stance will hurt their prospects. | On Friday the blue-chip index closed down 1.4%, or 97.6 points lower, at 6,730.43. Firms exposed to emerging markets were among the biggest losers as investors fretted over how Trump’s anti-trade stance will hurt their prospects. |
| On Wall Street, a Trump-driven rally petered out and after hitting a fresh record high on Thursday the Dow Jones industrial average eased back and was bobbing around the unchanged mark during Friday afternoon trading. | On Wall Street, a Trump-driven rally petered out and after hitting a fresh record high on Thursday the Dow Jones industrial average eased back and was bobbing around the unchanged mark during Friday afternoon trading. |
| Banking shares have benefited since the Trump victory as investors reminded themselves of his campaign pledge to tear up Dodd Frank – post-banking crisis reforms – and other regulations. | Banking shares have benefited since the Trump victory as investors reminded themselves of his campaign pledge to tear up Dodd Frank – post-banking crisis reforms – and other regulations. |
| Deutsche Bank was given a fillip on hopes that the Department of Justice would accelerate its talks over a settlement for a decade-old mis-selling scandal but demand less than the initial $14bn. Fears Deutsche cannot pay this sum have driven its shares to 30-year lows below €10, although on Friday they rose by 4.6% to their highest level since late June. | |
| “The sweeping Republican victories on 9 November mean that some of the Democrat appointments at the US Department of Justice have only a few weeks left before they are replaced. Accelerating litigation settlements with banks may be one way to end a DoJ tenure with a sense of achievement. Swifter resolution would likely result in smaller settlements for the banks, since larger fines could lead to [potentially lengthy] court cases,” said analysts at Barclays, who said this would help Deutsche and Credit Suisse. | |
| But it could be more troublesome for Royal Bank of Scotland, 73% owned by UK taxpayers, which is yet to begin settlement talks over the same mis-selling scandal involving residential mortgage backed securities (RMBS). | |
| More broadly, Trump’s fiscal stimulus policies might also help. “This comes at a time when the confidence in the efficacy of monetary policy appears to be on the wane in any event … Shifting the focus of the rates debate would undoubtedly be helpful for the revenue outlook at European banks,” the Barclays analysts said. | More broadly, Trump’s fiscal stimulus policies might also help. “This comes at a time when the confidence in the efficacy of monetary policy appears to be on the wane in any event … Shifting the focus of the rates debate would undoubtedly be helpful for the revenue outlook at European banks,” the Barclays analysts said. |