Stocks enjoy 'Trump bump', but oil slumps

AFP | London

Email : editor@newsofbahrain.com

Global stock markets climbed on Tuesday as Donald Trump wasted no time in starting his second term as US president with a raft of announcements affecting the global economy.

Oil prices slumped however on the prospect of more drilling in the United States, while the dollar gave up its initial gains. Wall Street's major indices rose out of the gate, having been shut on Monday for the Martin Luther King holiday, which coincided with Trump's inauguration.

Briefing.com analyst Patrick O'Hare spoke of a "Trump bump" in trading.

"This bump follows yesterday's inauguration," he said, noting that Trump had "wasted no time with a slate of executive orders that unwound a lot of the Biden administration's policies".

On becoming president, Trump signed a executive orders that indicated he could resume his hardball approach to global diplomacy and trade.

He also spoke about the possibility of imposing a 25% tariff on Canadian and Mexican goods, which sent their currencies tumbling.

Canadian and Mexican stock markets were marginally higher in Tuesday trading.

"What was missing in yesterday's executive orders, however, was any declaration of a decisive tariff action against China," said O'Hare.

"Instead, President Trump said existing trade agreements should be reviewed for any recommended revisions."

Analysts at Goldman Sachs also found Trump's initial announcements to have been "more benign than expected".

"Trump’s comments on China were notably less hawkish than during the presidential campaign or even his more recent comments since the election," they said.

That helped Chinese markets push higher, with Hong Kong gaining nearly one percent.

A top Chinese official said on Tuesday that no country would emerge victorious from a trade war.

"Protectionism leads nowhere and there are no winners in a trade war," Vice Premier Ding Xuexiang said in a speech at the World Economic Forum in Davos, Switzerland.

Trump also gave social media app TikTok 75 days to find a buyer for its US business, after it missed a deadline on Saturday ordering its Chinese owners ByteDance to sell its US subsidiary to non-Chinese buyers or be banned.

European stocks also ended the day in the green, with both Frankfurt's DAX and London's FTSE 100 setting record closes.

Wall Street received an initial Trump bump after his November re-election, with investors excited about the prospect of tax cuts and deregulation.

However they pulled back in December over fears Trump's plans to slap tariffs on key US trading partners would spark inflation and dim the prospect of further cuts to interest rates. Oil prices slumped on Tuesday after the Trump administration declared a "national energy emergency" to significantly expand drilling in the world's top oil and gas producer.

"Mr Trump’s full-throated yell for US producers to 'Drill, baby, drill!' is not new. And it's perfectly logical that prices should fall at the prospect of increased supply," said David Morrison, Senior Market Analyst at Trade Nation.