THE Australian stockmarket has staged a remarkable rally as fears over the impact of a Donald Trump-led US switches to hunger for a slice of his stimulatory American pie.
Investors pounced on positive cues from Wall Street to drive the benchmark ASX 200 index 3.3 per cent higher — its strongest single-day session in five years.
The bourse rocketed shortly after opening and duly held the ground all day, seemingly belying a shock election result that had some commentators predicting a US recession within two years.
Adding more than $54 billion to the collective value of Australia’s top listed companies, the bounce capped a stunning but volatile two days of trading in which the benchmark index gyrated more than 5.5 per cent from trough to peak.
The market enjoyed a strong lead from Wall Street, which was up 1.4 per cent overnight on Wednesday as investors belatedly bought into Mr Trump’s promises of a $US500 billion infrastructure splurge and hefty corporate tax cuts.
“It’s been a big day, a busy day and the trading volumes have been pretty large,” CMC chief market analyst Ric Spooner said.
The resource and finance sectors led the rally, with investors in companies such as BHP Billiton and Rio Tinto — both soaring 8.2 per cent — latching onto the “spend and build” mantra of Trumponomics and an overnight surge in commodity prices.
Mr Spooner said the big four banks, up about 4 per cent on average, benefited as they were proxies for the broader market when investors wanted to sell out, or in yesterday’s case, pile back in.
But he warned against reading too much into the jump given the market was still below its August highs. “I suspect this will be a recovery rather than a big launch into a bull run,” he said.
“Remember he (Trump) doesn’t get inaugurated until late January and we’ve just got a very broad policy direction at the moment.”
Economists said the rebound suggested markets thought life under a Trump administration might not be as dramatic as initially feared.
Policies such as building a wall on the Mexican border, tighter immigration controls and 45 per cent tariffs on Chinese imports still needed the support of Congress, while Mr Trump’s conciliatory victory speech showed he was market-savvy, they said.
“Much will ultimately depend on whether we get Trump the pragmatist or Trump the populist,” AMP Capital chief economist Shane Oliver said.
Business lobby groups yesterday were also coming to terms with the shift in the political landscape.
Ai Group chief Innes Willox, speaking on Sky Business, said Mr Trump’s resonance in the key rust-belt states of Wisconsin, Michigan and Ohio provided a lesson for politicians at home regarding disaffected workers, especially those in manufacturing.
“You just can’t expect as a political leader to airily wave goodbye to entire industries and not expect some political repercussions at the ballot box,” Mr Willox said.
