Winners and losers among European stocks in the immediate aftermath of US Republican presidential candidate Donald Trump’s election victory swapped places on Friday, sending equities lower.
Industry groups that rallied as Trump defeated his Democratic rival, Hillary Rodham Clinton, lost ground, while those that were punished recovered, on bets the moves went too far.
Construction firms and commodity producers were among the worst decliners, after rallying on Wednesday on optimism of higher infrastructure spending. Drugmakers also fell, after surging on speculation of less regulatory oversight. Bond-proxy sectors, such as utilities and real-estate firms, rebounded from two days of losses.
The STOXX Europe 600 Index fell 0.4 percent at the close after failing to hold opening gains of as much as 0.7 percent. The second daily drop trimmed the benchmark’s biggest weekly rise since July. European equities lost momentum after a three-day rally that broke their longest spell without gains since 1994.
“We’re taking a breather and beginning to think about the wider repercussions of” Trump’s win, said Witold Bahrke, a macro strategist at Nordea Investment Funds in Luxembourg. “You can say this is pro-growth and pro-equity, but it depends hugely on the concrete type of measures he takes. We are moving away from the hope phase to the delivery phase.”
After an initial sell-off prompted by the surprise of Trump’s win wore off, European stocks on Wednesday were boosted by industries seen benefiting from the outcome. Heavyweights like banks and healthcare shares rallied, as did miners and construction. The Republican’s promises to increase public spending also spurred bets for higher inflation, dragging down defensive shares, such as utilities and real estate. The STOXX 600 is up 2.7 percent this week.
Money managers focused on emerging markets fell on Friday amid concern the Federal Reserve would become more aggressive in raising rates under a Trump-led administration. Ashmore Group PLC and Aberdeen Asset Management PLC lost at least 7 percent.
The implications of the vote are “most significant in the emerging markets, which are a dangerous place to be not only in the coming weeks, but probably also the coming months,” Bahrke said. “Partly because of the protectionism tendency in the US policy from now, but also because of the significant rise in the dollar, we might have focused too much on the pro-growth outcome of this election, and not enough on the flip side of the coin — much tighter financial conditions primarily driven by the dollar.”
The STOXX 600 Banks Index fell 0.2 percent, after surging 7.8 percent in the past four days on bets higher inflation would improve profitability and financial rules would ease.
Carmakers were the biggest advancers after Trump selected a prominent critic of global warming to lead his environment agency’s transition team.
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