Stock prices on Wall Street powered past the key level of 20,000 points for the first time yesterday, pulling global markets up with them, as investor concerns eased over Donald Trump’s domestic policies.
European markets ended the day higher after the US blue-chip Dow Jones Industrial Average quickly blew through the much-anticipated milestone in early trading in New York.
And that “Trump rally” had spilled into Europe, said Jasper Lawler at London Capital Group.
“For all the supposed uncertainty surrounding the new president, it only took two full days in office for the Dow to breach 20,000,” the expert said.
A “number of psychological factors at work” that needed to be watched, Lawler said.
A breach of the 20,000-mark in the Dow “will create a FOMO (fear of missing out) effect on the under-invested, generating more buying interest.”
“On the other hand, the 20,000 level will attract profit-taking from some long-time stock market bulls, causing a counteracting selling force,” Lawler said.
Nevertheless, “we remain confident in the durability of the US stock market rally,” he insisted.
A raft of different measures announced by Trump in his first days in office included a withdrawal from the Trans-Pacific Partnership trade deal, a clearing of the way for controversial oil pipelines and his repeated commitment towards building a wall on the border with Mexico.
The new president signed off on the controversial Keystone XL pipeline – which would carry oil from Canadian tar sands to US Gulf Coast refineries – and another crossing in North Dakota.
Also Tuesday, it emerged that House Speaker Paul Ryan signalled support for public works spending, while reports surfaced that Senate Democrats will unveil a $1tn infrastructure plan, offering the president their support if he backs it.
The developments soothed anxiety on markets that promised economy-firing spending and tax-cutting measures were being put on the back burner by Trump in favour of reviewing global trade deals.
London’s FTSE 100 gained 0.2% at 7,164.43 points, Frankfurt’s DAX 30 was up 1.8% at 11,806 and in Paris CAC 40 jumped 1% at 4,877.67 at close yesterday.
But London gains were tempered as sterling rebounded to multi-week highs against the euro and dollar.
The British pound had slid Tuesday after the UK Supreme Court’s verdict that Britain’s government must win parliament’s approval before launching Brexit negotiations.
But sterling recovered lost ground as markets focused on the greater certainty that the ruling delivered.
British Prime Minister Theresa May had wanted to start the Brexit process – invoking Article 50 of the EU treaty – without a vote in parliament, but she failed to overturn a High Court ruling that said lawmakers must be consulted.