The stock market bloodbath that was expected following Donald Trump’s electoral victory has not materialised, largely due to rocketing pharmaceutical and precious metals mining stocks.
The FTSE 100, which closed last night at 6,843, slumped early doors to 6,696, but has since recovered to around 6,773.
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Investors are predictably seeking the safety of defensive stocks such as Fresnillo PLC (LON:FRES), up 9%, and Randgold Resources Limited (LON:RRS), up 7%, as the dust settles following Trump’s triumph.
They are joined at the top end of the Footsie leader board by pharmaceuticals stocks, which are wanted – not because Trump won, but because Hillary Clinton did not.
Clinton had pledged to clobber the pharmaceutical companies should she be elected, and with that threat removed the market has stampeded back into drugs companies shares, which are, in any case, traditionally viewed as defensive holdings.
“We believe that overall a Trump win is positive for the pharma sector in respect of drug pricing as Clinton’s reforms now look almost certainly off the table,” said Liberum Capital Markets.
“That said if the Republicans also win control of both the House and Senate, then the repeal of Obamacare will be a real possibility given Mr Trump has explicitly promised to ‘completely repeal’ Obamacare as part of his healthcare policy.
“How he could go about doing so is somewhat uncertain and could create volatility in the sector due to the both positive and negative effects on pharma from different aspects of Obamacare (for example the positive expansion of access versus the negative of certain other measures). The other uncertainty is around the US dollar where investors have speculated that a Trump win would see it weaken,” the broker opined.
“Finally, the other potential positive for the sector would be a failure in California to pass the Proposition 61 drug pricing proposal which could have led to significant price cuts for the pharma industry for government paid patients,” Liberum said.
Early unconfirmed local media reports point to California voting to reject Proposition 61.
Meanwhile, Deutsche Bank has run a stock screen to identify stocks in its coverage universe that normally fare well when US policy uncertainty rises, and has come up with the following candidates: Deutsche Telekom, Unilever, Sanofi and Coloplast.
Footsie winners
- Hikma Pharmaceuticals PLC (LON:HIK) +7.6%
- Shire Plc (LON:SHP) +4.3%
- AstraZeneca PLC (LON:AZN) +2.4%
- GlaxoSmithKline plc (LON:GSK) +1.5%
- Smith & Nephew PLC +0.1% (LON:SN.