Mining and metals company stocks surged on Wednesday after the election of Donald Trump, as investors looked to the president-elect’s promises to revive U.S. manufacturing and rehabilitate the country’s aging infrastructure.
Swiss commodities giant Glencore PLC was up 3% while the world’s second largest miner by market value, Rio Tinto PLC gained 2.5%. ArcelorMittal, the world’s largest steelmaker, was up 3.9%.
Overall, in London, the FTSE 350 mining index was up 3.4% compared with a 0.2% drop in the FTSE 100 index. Among the biggest winners here was Mexican precious metals producer Fresnillo PLC, which rose 9%.
“The market is telling you that the mining sector is the biggest beneficiary of a Trump election, particularly precious metals,” said Jeremy Wrathall, senior analyst at Investec Securities.
Mr. Trump had made rejuvenating the U.S. coal industry a large part of his platform, but that wasn’t seen as the main factor driving global mining company stocks higher.
Other reasons include a weakening dollar, making it cheaper to purchase U.S. dollar denominated commodities. Both copper and nickel were up 2.7% and 2.9% respectively.
Over the longer term, investors expect Mr. Trump’s promise to spend more on infrastructure, hospitals, highways and railways to result in extra demand for commodities such as copper, steel and aluminum. This “volume effect would take at least a year or so” to hit miners’ earnings, said Mr. Wrathall.
Mr. Trump has also called upon Mexico to pay for the construction of a long wall on the U.S. border and to revisit trade agreements with key partners to extract a fairer deal. The Mexican peso fell to its lowest level ever against the U.S. dollar as a result, following Mr. Trump’s election.
Mr. Trump’s promises have appealed to many voters in the rust belt-states that were formerly a bastion of U.S. manufacturing but which are now suffering from increased competition abroad.
It has also raised the specter of economic uncertainty among some investors who fear Mr. Trump’s talk of protectionist trade policies and higher fiscal spending could hinder U.S. growth prospects, according to Liberum Capital analyst Richard Knights.
Investors responded by piling out of the U.S. dollar to invest in gold, a safe-haven asset class that investors typically flock to amid economic uncertainty as a way to preserve capital. Spot gold was up 2.2% at $1,302 an ounce.
The gold price rise spurred shares in West Africa’s Randgold Resources Ltd. and Russia’sPolymetal International PLC to rise 7.9% and 6.5% respectively.
Fresnillo, however, climbed the most out of the U.K.’s FTSE 100 index given that it earns all of its revenue in U.S. dollars (through the sale of gold and silver) and incurs a significant chunk of its costs in Mexican pesos. This means its profit margin should expand in U.S. dollar denominated terms due to gold and currency movements.
Write to Alex MacDonald at [email protected]
Original Article: http://www.wsj.com/articles/mining-companies-seen-as-winners-after-trump-victory-1478699509
