US election results drive up stocks and oil
November 4, 2004
New York - World stock markets cheered as investor-friendly US President George W. Bush secured re-election on Wednesday but oil prices also soared and an early dollar rally faded.
On Wall Street the Dow Jones Industrial Average climbed 101.32 points, or 1.01 percent, to close at 10 137.05. The broad-market Standard and Poor's 500 index gained 12.62 points, or 1.12 percent, to 1 143.20.
"Most on Wall Street got the man they wanted," AG Edwards analyst Alfred Goldman said.
In Europe stock markets got off to a flying start amid expectations of a Bush win, closing in positive territory but off their highs of the day.
The FTSE 100 index ended up 0.54 percent at 4 718.50, the DAX rose 0.04 percent to 4 039.04 points in Frankfurt and the CAC 40 gained 0.11 percent to 3 769.93 points in Paris.
Bush declared victory in the contest and asked Americans for "broad support" as he pursues a war on terrorism and defends emerging democracies in Iraq and Afghanistan.
His Democrat rival, John Kerry, had conceded in a telephone call to the president.
"This is modestly bullish in the near term for stocks and the dollar, and bearish for bonds, but the effects are modest, and we may have already seen most if not all of this effect," said Barclays Capital analyst Larry Kantor.
Vince Boberski, chief fixed income strategist at RBC Dain Rauscher, also warned investors against overdoing it.
"The conventional wisdom holds that Bush is better for stocks than Kerry would have been, with much of that riding on the assumptions of continued heavy deficit spending, spurring economic growth, and lower taxes on capital gains and dividend income than would have potentially been the case in a Kerry administration," he said.
"That is probably the case, but we also need to keep in mind that there are some very important fundamental headwinds to significantly higher stock prices, namely that we have passed the peak in corporate earnings growth and that margins are set to fall as businesses outside of a few select sectors like raw materials have difficulty passing along input price increases to consumers."
World crude oil prices jumped, fell and then soared again on a market rocked by speculation over the implications of Bush's victory.
New York's main contract, light sweet crude for delivery in December, finished at $50.88 a barrel, up $1.26 on the day, after plunging to a low of $48.65. Brent North Sea crude for December rose $1.01 to finish at $47.56 a barrel. It touched a low of $45.45.
Prices surged in early trade as traders worried about Middle East tensions and energy policy under Bush, dipped on news of a surge in US commercial crude oil stockpiles, and then soared again on renewed post-election fears.
"I believe the fluctuation in oil over the past few days has been tied to the election," said Wachovia market analyst Jason Schenker.
"The Bush administration is much more focused on fossil fuels, a Kerry administration would be more focused on renewables."
The dollar rose initially but - as was widely expected - the rally soon ground to a halt as economists warned a Bush victory would do little to ease worries over the US economy and big trade deficit.
In late New York trade, the euro gained ground against the dollar, rising to $1.2820 from $1.2741 late Tuesday. But the dollar also edged up to ¥106.24 from ¥106.02.
"We maintain the key driver of dollar selling has been more the prospect of an economic slowdown ahead rather than uncertainty over the outcome of the election," said Bank of Tokyo-Mitsubishi analyst Derek Halpenny in London.
"We therefore place far more importance on the outcome of upcoming economic data than on an election victory for President Bush." - AFP
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