Mining Companies Seen as Winners After Trump Victory
09 Novembro 2016 - 12:21PM
Dow Jones News
By Alex MacDonald
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's Polymetal 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 alex.macdonald@wsj.com
(END) Dow Jones Newswires
November 09, 2016 09:06 ET (14:06 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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