The sharemarket posted its best week since July, as fear quickly turned into optimism after the shock presidential victory to Donald Trump and a sweep of power for the Republican party.
In a volatile week, the markets initially moved higher in anticipation of a Hillary Clinton win after the FBI cleared her of any charges with regards to official emails sent from a private server.
![Mining stocks were the biggest winners from Donald Trump's presidential victory.](/web/20161112132931im_/http://www.watoday.com.au/content/dam/images/g/s/k/z/f/9/image.related.articleLeadwide.620x349.gsmyyk.png/1478846325700.jpg)
On Wednesday the S&P;/ASX 200 Index fell as much as 4 per cent, threatening to dip below 5000 points as the Asian region reacted in real time to Donald Trump's win. But a subsequent rally on Wall Street after a gracious and conciliatory speech by Trump, and a majority for the Republican party, spurred bets that Trump will aggressively pursue his growth agenda.
The ASX posted its best day since 2011 on Thursday, jumping 3.3 per cent, and while the rally lost some steam on Friday the benchmark index still ended the session up 0.8 per cent to 5370.7 points, 3.7 per cent higher for the week, its first weekly rise in five weeks.
The materials sector, which includes mining stocks, was the week's best performing sector, soaring 7.5 per cent, on hopes commodity prices would benefit from Mr Trump's infrastructure spending plans. BHP Billiton's share price topped $25 a share on Friday for the first time since October 2015, closing at $24.94.
On Friday, the bank stocks were the major beneficiaries of the market's 'Trump bump', with Commonwealth Bank of Australia lifting 3.4 per cent, the strongest stock by weight. The financials index finished the week up 6.3 per cent.
The local banks followed Wall Street's major lenders higher on news that one of Trump's first orders of business would be to "dismantle" the Dodd-Frank law which was introduced by the Obama administration to increase the regulation in the financial sector following the global financial crisis.
Behind the extraordinary market moves, the building thematic of a sell-off in yield stocks in favour of value continued to play out, Perpetual multi-asset head of investment strategy Matthew Sherwood said.
"The key to the overall market's both absolute and relative performance comes down to the one factor driving every asset price, and that is the long-dated bond yield," he said.
The only sectors to finish in the red for the week were utilities, 4.5 per cent, telcos, down 3.3 per cent and real estate, down 1.8 per cent.
On Friday, Telstra fell 2.7 per cent to a two-year low of $4.72, sliding 3.7 per cent over the week.
Whether the market's rally can continue will depend on Mr Trump's impact on consumer confidence and his ability to stimulate the economy, Mr Sherwood said.
Market movers
Iron ore
Iron ore futures continued to rally on Friday, rising another 6per cent after the spot price shot above $US74 a tonne, its highest point since November 2014, on the prospect of a big infrastructure spending program in US under President-elect Donald Trump and increased Chinese demand. The price of the commodity has now almost doubled since December. The biggest miners on the ASX also enjoyed a strong week, which also saw rises in copper and coal prices. BHP Billiton gained 12 per cent for the week, Rio Tinto rose 11.7 per cent, while pure play miner Fortescue Metals Group soared 18.7 per cent.
Australian dollar
The local currency swung sharply in overnight trade on Thursday as investors weighed stronger commodity prices agains a sharp rise in US bond yields, that pushed the US dollar higher. The Aussie hit as high as US77.4¢ on Thursday night, following iron ore futures higher, before snapping back as far as US75.7¢. CBA strategist Elias Haddad said the greenback had further to run on the back of Donald Trump's fiscal policies which are expected to drive inflation higher. In late trade on Friday the currency was buying US76.15¢.
US markets
The Dow Jones Industrial Average hit a record high overnight on Thursday, driven by a rally in bank stocks after a statement on Donald Trump's transition website talked of "dismantling" the Dodd-Frank law, financial sector regulations which came in place in the wake of the global financial crisis. Wells Fargo surged 7.6 per cent while Bank of America rallied 4.4 per cent. Local bank stocks enjoyed a boost in their wake on Friday.
Bonds
Rising inflation expectations hit bond markets hard following Trump's victory, with the yield on Australia's 10-year government bond spiking to 2.59 per cent to its highest point since April. It stands in stark contrast to Wednesday's market meltdown, which sent equity markets tumbling along with bond yields, to as low as 2.223 per cent. US 10-year treasuries moved up 7 basis points on Friday to 2.15 per cent.
Stock watch: Bluescope Steel
Local steelmaker Bluescope Steel was among the week's best performing stocks, rallying 17.7 per cent to $8.73. The stock may have been swept up in the optimism surrounding President-elect Donald Trump's infrastructure spending plans, but it also upgraded its first-half 2017 financial year earnings expectations at its AGM to at least $510 million, up 50 per cent on the previous half.
UBS raised the stock from 'neutral' to 'buy', while Deutsche Bank maintained its 'hold' rating, saying steel spread weakness in East Asia presents a downside risk.
Meanwhile, ratings agency S&P; Global raised the company to BB+ based on a stable outlook and sustainable, strong credit metrics.