RECAP: for the week ending November 11th 2016

November 13, 2016

The biggest news of the week was by far the surprising outcome of the US presidential election. For the second time in a year the market has incorrectly predicted the outcome of a major global event. There was muted reactions however when compared to the currency volatility when the UK’s Brexit referendum passed. Stocks rallied as investors reassessed prospects for corporate earnings, economic growth, and inflation in the wake of the surprising victory of Donald Trump in the U.S. presidential election. Gains varied widely depending on how different sectors might fare under the new administration. Financials, industrials, and health care did well, while technology and utilities went down.  All the major indexes recorded solid gains. The blue chip Dow Jones Industrial Average reached a record high.

he week began with a strong rally on Monday that pushed the Standard & Poor’s 500 Index 2.2% higher and ended a nine-day losing streak, the longest since 1980. The surge was attributed to rising expectations that Hillary Clinton would win Tuesday’s election as most polls had predicted. Stocks grinded higher on Tuesday as the nation voted and then rallied again Wednesday, advancing 1.1% despite the surprising Trump victory. While the postelection rally was contrary to market expectations for a sell-off if Trump won. Trading volume was the largest since the Brexit vote in June.

In Europe equities rallied following the U.S. election results, as investors perceived that a Trump administration would favour European banks with significant U.S. exposure along with insurers, European military and defense companies, and mining and basic materials firms tied to infrastructure building

In Japan, the TOPIX 100 rose 1.5% to close at 885.53, and the Nikkei 225 climbed 2.8%, closing at 17,374.79, after a sharp sell-off and subsequent recovery following the U.S. election results. The yen declined steadily against the U.S. dollar throughout the weak, hitting a low of ¥106.83 on Thursday. That decline ran counter to expectations that the yen would rally after a Trump win as investors sought safe-haven assets. Some see the yen’s fall as good news for the Bank of Japan (BoJ), as a weaker yen may help its efforts to revive domestic inflation.

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