Friday, November 22, 2024

Tesla and US bank stocks jump and renewables slump

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Donald Trump’s victory in the US presidential election reverberated across global stock markets on Wednesday, as investors raced to back the winners and sell the expected losers from his win.

Winners

Tesla

Tesla, whose chief executive Elon Musk became one of Trump’s most vociferous backers, surged nearly 15 per cent in pre-market trading.

Musk, who contributed more than $100mn to the pro-Republican America Pac, has been promised a role as head of a department of government efficiency in a second Trump administration.

Speaking as he declared victory in Florida, Trump told supporters that “a star is born . . . Elon” and hailed the Tesla boss as a “super genius”.

Banks

US bank stocks jumped as investors bet that interest rates would stay higher for longer under Trump, given that his economic policies are seen as inflationary.

Shares in Goldman Sachs were up 6.8 per cent in pre-market trading, JPMorgan rose 6.6 per cent and Morgan Stanley was 7 per cent higher.

Manish Kabra, head of US equity strategy at Société Générale, said that the prospect of a “red sweep” in which the Republicans take control of the White House and the two houses of Congress would also deliver broader benefits to companies whose fortunes are tied to the US economy.

“Buy US cyclicality: that means regional banks, private equity, private credit, oil stocks and classic reshoring beneficiaries like industrials,” Kabra said.

Trump’s proposed cuts to corporate tax rates would also deliver “an immediate boost to earnings”, he added.

Defence

A Trump presidency is expected to be accompanied by higher defence spending, particularly among European countries that came under fire in his first term for failing to meet their Nato commitments

Shares in Lockheed Martin and Northrop Grumman both rose 3 per cent in pre-market.

In Europe, the Stoxx Europe aerospace and defence index jumped 3.4 per cent to a record high, with Trump’s return seen as a boon for the region’s defence industry, given his calls on Nato members to spend more than 2 per cent of their GDP on defence. 

“A more isolationist US” would almost certainly lift European defence spending and be a boost for the continent’s defence groups, said Sam Burgess, equities analyst at Citi.

Line chart of Stoxx Europe aerospace and defence index showing European defence stocks hit record high

BAE Systems, the UK’s biggest defence company, was up 4.4 per cent and Rolls-Royce gained more than 4 per cent. In Frankfurt, shares in Hensoldt rose more than 3 per cent while in Milan shares of Leonardo, one of Italy’s largest defence groups, were up 3.8 per cent.

Oil and gas companies

Trump courted oil companies during his campaign, vowing to rip up much of President Joe Biden’s environmental and climate agenda and imploring the industry to “drill, baby, drill”.

ExxonMobil, the biggest oil major, and rival Chevron were both up more than 3 per cent in pre-market trading, despite a stronger dollar hurting the oil prices.

Losers

Renewables

By contrast, renewable energy companies in Europe slumped amid fears that Trump could abolish the tax breaks and subsidies provided by Biden’s administration.

Danish wind turbine manufacturer Ørsted, the world’s largest, weakened 14 per cent while Danish rival Vestas was down 10 per cent.

The S&P Global Clean Energy index, which tracks the world’s largest clean energy companies, was down almost 2 per cent. 

Industry executives had been braced for a Trump victory, with Sean McGarvey, president of North America’s Building Trade Unions, telling a conference last week that a Trump victory would be “terrible” for the nascent US offshore wind industry. 

Joe Biden’s administration turbocharged offshore wind deployment and set a target of 30GW of offshore wind by 2030. Trump has vowed to stop projects on “day one” of the new administration. 

Tariff-exposed sectors

The prospect of Trump imposing a raft of new tariffs hit shares of European carmakers. Trump has said he will introduce steep levies on imports, with a plan to impose tariffs for goods from Europe at 20 per cent for Europe and 60 per cent for China.

The broad-based Stoxx 600 autos and parts index fell 2 per cent, with the threat of tariffs on imported cars, including from Mexico and the EU, weighing on German groups such as BMW and Volkswagen, which were down as much as 6 and 3 per cent, respectively. 

Additional reporting by Mari Novik, Sylvia Pfeifer and Rachel Millard

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