Dow hits 20,000 on Trump rally, pound reaches six-week high – as it happened

Graeme Wearden (until 1.15) and Nick Fletcher

from on 2017-01-25 17:48 (#2A5MD)

All the day's economic and financial news, as shares rally in Asia and Europe after US markets hit fresh record highs

Pound rises to almost $1.26
Investors think Trump will deliver on fiscal spending promises
Oil pipeline plan and Mexican Wall loom
Mexican peso weakens
Markets jump on economic optimism
The agenda: UK factory data

5.48pm GMT

The global market surge which has led to the Dow Jones Industrial Average finally breaking through the 20,000 has also seen other markets move higher.

The records set by the Dow, S&P and Nasdaq Composite, boosted by the Trump rally and reasonable updates from US stalwarts such as Boeing, have helped lift European markets. Good results from Logitech and Banco Santander were also a factor in the confident mood on the continent.

5.04pm GMT

There is much talk about whether the current stock market levels mean we are in a new bubble phase (leading fund manager Neil Woodford recently compared the euphoria of recent months to the dotcom boom and bust). But Laith Khalaf, senior analyst at Hargreaves Lansdown, said:

Stock indices in the US and UK may well be at or near record highs, however when the earnings generated by companies in these markets are factored in, stock valuations show neither the extreme pessimism of 2008, nor the irrational exuberance of 1999. This means they are trading somewhere in the middle of their range, so are neither exceptionally cheap or hideously expensive. In the short term the stock market could move in either direction, but for long term investors it still makes sense to keep a healthy slug of their portfolio in equities.

Meanwhile bonds have come under pressure of late, as it looks like the US central bank is in the mood to raise interest rates this year. However there have been many false dusks for the bond market, which has defied expectations since ultra-loose monetary policy was initiated all those years ago in response to the financial crisis. Central banks in the UK, Europe and Japan are still engaged in stimulative activity, and while the US Fed is starting to push in the opposite direction, it's likely to err on the side of caution lest by raising rates too soon it damages the US economy, and propels an already strong dollar even further upwards. While the best days for the bond market may be behind us, there's no sign that interest rates are going to return to pre-crisis levels any time soon, which acts as an anchor on rising yields.

4.55pm GMT

And here's the response to the Dow crossing 20,000 from the man most analysts say helped the recent surge in stock markets. Via Twitter of course:

Great! #Dow20K https://t.co/wXFhXBLgag

4.26pm GMT

Away from the Dow for a moment, and early elections in Italy could be on the cards after a call ruling. Reuters writes:

Italy's constitutional court said on Wednesday that part of a contested electoral law was invalid, but left much of the system intact in a ruling that could open the way for early elections in 2017.

In a written verdict, the court rejected the idea that national elections could be held over two rounds, but agreed that any party which took at least 40 percent of the vote straight out should win an automatic parliamentary majority.

4.05pm GMT

It is not just the Dow in uncharted territory.

The S&P 500 and Nasdaq Composite both ended at new highs on Tuesday, and in morning trading they have added to their gains. The S&P is currently 0.6% higher, while Nasdaq is 0.74% better.

3.42pm GMT

And some seem confident the US rally will continue. Jasper Lawler, senior market analyst at London Capital Group, said:

For all the supposed uncertainty surrounding the new President, it only took two full days in office for the Dow to breach 20,000. It comes a day after the S&P 500 hit a new record high.

Dow 20k came on the same day President Trump was preparing to sign an executive order to build a wall on the US-Mexican border. The big industrial giants including Caterpillar and General Electric led the gains on the expectation of an increase in infrastructure spending under Trump. A lot of diggers will be needed to build the wall! In reality, Trump can start the building, but will need help from Congress to get it finished.

3.32pm GMT

There was some relief among analysts that the Dow had finally made it. Michael Hewson, chief market analyst at CMC Markets UK, said:

In all honesty it couldn't have come a moment too soon, finally putting us out of our misery so we can start to focus on something else more important.

On a serious note, while it's important to acknowledge the breaking of a significant milestone, in the broader scheme of things it probably doesn't matter that much, apart from giving investors a feel good boost.

3.30pm GMT

It looked for a while as if the Trump rally which followed the election of the US president was about to run out of steam, as the Dow tried and failed a couple of times to breach the 20,000 barrier. Connor Campbell, financial analyst at Spreadex, said:

The Trump rally seemed to have disappeared as Christmas turned into the New Year. However, with the thin-skinned President now in power and talking about stripping back regulations and building his infamous wall, investors have begun to get excited all over again. Following yesterday's late rally the Dow Jones rose by 130 points as the bell rang on Wall Street, in the process breaking that 20,000 psychological barrier.

These good vibes travelled over to Europe, where the DAX and CAC rocketed 2% and 1.2% respectively. That leaves the German index at its highest point since May 2015, and only 600 points from its own all-time record.

3.17pm GMT

Here's CNBC covering the moment the Dow passed 20,000, pointing out that unlike the last time it attempted to cross this level, this move comes after a number of businesses including Boeing have reported well received updates.

WATCH: The moment that the Dow hit 20,000 for the first time ever pic.twitter.com/0fvzncrKtP

2.59pm GMT

And here are the big movers so far in the Dow:

2.53pm GMT

The Dow has breached the 20,000 barrier just two months after crossing through 19,000, as the rally following Donald Trump's election as US president hit its stride.

2.43pm GMT

The new Wall Street record comes after a few attempts at the 20,000 barrier. Dominic Rushe writes:

The Dow Jones industrial average finally broke through the 20,000 barrier on Wednesday morning - a historic high for the leading stock market index and one it has been close to breaching since Christmas.

The Dow, which first nearly topped 20,000 on 13 December and again on 6 January, when it came within 0.37 points of the landmark, finally broke through after the opening bell was rung on Wall Street by Ashton Poole, CEO of lender Triangle Capital. The closing bell will be rung by executives from InBev, brewers of Stella Artois but whether the Dow's rise will go flat by then remains to be seen.

2.37pm GMT

So is this a bubble or something sustainable? Neil Wilson at ETX Capital said

The Dow has capped a remarkable rally since Donald Trump's election by finally breaking the 20,000 level. It's psychologically huge and, after a bit of pullback ahead of the inauguration, really confirms that the 'great rotation' from bonds to stocks is definitely upon us. Fears about protectionism are running second to optimism about inflation and growth - for now at least.

Donald Trump's election victory, far from roiling markets, has been greeted with universal optimism about what it means for global growth. Something like $3trillion has been pulled from bonds and $3trillion pumped into equities. President Trump is bound to take credit for the rally, and he may well be justified to some degree...

The other argument claims that this is a massive bubble, irrational exuberance of the worst kind that will come unstuck when Trump fails to deliver the reflationary policies that the market is pinning its hopes on...

However, bull markets normally only turn into bear markets on an expected downturn in the real economy. There is little evidence that the US is heading for recession - quite the reverse as Trump is ushering a new era of pro-business policies that affirm growth prospects.

2.30pm GMT

And it's there! The Dow Jones Industrial Average is up 116 points and has crossed through 20,000 for the first time.

BREAKING: Dow Jones industrial average eclipses 20,000 for the first time; cheers from the floor of the New York Stock Exchange.

2.29pm GMT

Just a couple of minutes now until Wall Street opens and the futures are suggesting the Dow Jones Industrial Average could indeed make 20,000 for the first time.

The Trump rally and some positive trading updates from the likes of Boeing and hard drive maker Seagate look set to help push markets higher.

1.34pm GMT

Elsewhere, shares in BT are struggling to make any ground after Tuesday's 21% slump in the wake of an accounting scandal at its Italian business and a weak outlook for a couple of its other divisions.

They have edged up 0.7% to 305.1p, but this is not exactly a big dent in Tuesday's 8bn loss.

1.01pm GMT

IG reckon that Wall Street traders can get the Dow 20k hats out.

Dow Jones 20,000 looks set to be hit today..
US Opening Calls:#DOW 19995 +0.41%#SPX 2288 +0.36%#NASDAQ 5127 +0.51%#IGOpeningCall

I presume we get a tickertape parade? Will be disappointed if not. https://t.co/qory0Il0i3

12.58pm GMT

After weeks of near-misses, could the Dow Jones finally hit the 20,000 point mark today?

The global stock market rally today is raising speculation that the Dow could hit this benchmark for the first time; it closed at 19,912 on Tuesday night.

Please free us from the Dow 20,000 oppression today!

Dow 20K klaxon at the ready

12.38pm GMT

The US dollar has dipped to a seven-week low against a basket of other major currencies (including the pound) this morning.

Chris Saint, senior analyst at Hargreaves Lansdown Currency Services, says there is "broad-based selling pressure on the dollar".

Pound marches to six-week high with U.S. dollar on the defensive https://t.co/Lt8FUKaePN pic.twitter.com/52cIPD155X

12.30pm GMT

Boom! The pound just hit $1.26 for the first time since December 14.

12.11pm GMT

Newsflash from parliament: Theresa May has just revealed that the government will publish a white paper outlining its Brexit plan.

#Breaking Government will publish White Paper outlining priorities in Brexit negotiations, Prime Minister Theresa May tells MPs #PMQs pic.twitter.com/LLbzhcg2ya

11.49am GMT

France's credit rating could come under threat if populist far-right Marine Le Pen reached the final stage of the country's presidential race, an official from Moody's has said.

Asked whether Le Pen progressing to the second round would prompt Moody's to move the outlook on France's Aa2 credit rating to negative, Dietmar Hornung said, "That is the obvious thing."

He gave the example of how Moody's waited until after Britain's vote to leave the European Union to put the UK's rating on a negative outlook, however.

11.32am GMT

The latest Guardian Brexit dashboard is out!

Our monthly healthcheck on the UK economy shows that the fall in the pound following the EU referendum is hurting the economy, pushing inflation higher.

Seven months on from the referendum, the Guardian's monthly tracker of economic news shows the weaker pound is being felt in the real economy more keenly than ever, as it raises the cost of imports such as energy and food and that gets passed on to consumers as higher prices in the shops.

To gauge the impact of the Brexit vote on a monthly basis, the Guardian has chosen eight economic indicators, along with the value of the pound and the performance of the FTSE.

11.08am GMT

Just in: UK manufacturers are their most upbeat since January 2015, according to the latest Industrial Trends survey from the CBI.

Factories also reported that domestic orders have grown strongly over the last quarter, but export growth has dipped back.

Record proportion of manufacturers concerned about skilled labour availability. #CBI_ITS #UKmfg https://t.co/OFPQJyY2TW pic.twitter.com/7AOqk9L4lT

Buoyant January #CBI survey bodes well for #UK #manufacturing at start of 2017; but prices a worry https://t.co/VJPV8UzQTq via @CBItweets

11.01am GMT

Optimism over Donald Trump's spending plans are expected to push shares higher on Wall Street later today.

The futures markets shows the S&P 500 and the Nasdaq rising by 0.3%, having hit record highs on Tuesday.

10.33am GMT

Relief that the supreme court's Brexit ruling is out of the way is pushing the pound towards $1.26, says Joshua Mahony, Market Analyst at IG.

Despite yesterday's court decision, markets continue to enjoy a degree of clarity over the UK's path that has not been seen since June's referendum result.

With Citibank and Credit Suisse the latest banks to voice their plans to move jobs out of London, it is clear that Theresa May needs to have a robust and dramatic jobs strategy if we are going to see the UK maintain growth over the coming years.

10.22am GMT

The UK pound is having a good morning, rising 0.5% to hit a six-week high of $1.2598 against the dollar.

This recovers yesterday's losses, which came after the supreme court's Brexit ruling.

For all the furore (aka political windbagging) around yesterday's UK Constitutional Court ruling, the only real question is how "tight" the wording of the Act of Parliament (to trigger Article 50) will be. The trick to stopping opponents tagging on conditions would be to make the Act very short, say as little as one paragraph, which would then make it very difficult to change as the rules state that "amendments must be ruled to be within the scope of the original text".

It should be emphasized that 'no one won anything' with the ruling, it is a simple principle that Parliament has to be consulted, if a proposed statute implies a change to the UK's basic law - Article 50 clearly fits that principle 100%.

Sterling having a good morning - Euro v Sterling back down towards 85 p ,not too bad for Ire Inc in scheme of things .

10.05am GMT

Here's Neil Wilson of ETX Capital on today's market moves:

There's something of the Trump bump about all this.

For instance, rising copper prices are a sign that global growth is turning positive off the back of his expected reflationary policies. But another leading indicator, the Baltic Dry Index, has slumped of late, a signal that fears of protectionist policies are very high. It's a mixed picture for miners and uncertain for sure.

9.35am GMT

Shares in UK eateries group Restaurant Group have slumped by 10% this morning, after another disappointing trading update.

9.23am GMT

Oof!! Confidence among German executives has weakened to a five-month low.

IFO reality check. Expectations pointing to slower growth ahead, still decent though.

9.10am GMT

At times like this, we all need a laugh.

And strong sales of spoof humour books and growing customer numbers at airport shops gave WH Smith reason for cheer in its latest trading update.

"As a result of the performance in travel we expect group profit growth for the year to be slightly ahead of plan.

"While there is some uncertainty in the broader economic environment, we remain confident that the group is well positioned for the year ahead as we continue to focus on profitable growth, cash generation and investing in new opportunities."

"Although the comparisons were tough, the business has come through well. How far the 225^th Anniversary celebrations of the company help trade this year remains to be seen, but the City will be relieved by the strong Christmas trading performance."

9.06am GMT

The Mexican Peso has weakened by 0.15% today, to 21.56 peso to the US dollar.

It's suffering from president Trump's threat to erect a wall on the US-Mexico border.

Trump tweets continue to drive sentiment and the President's most recent - "Big day planned fort NATIONAL SECURITY tomorrow. Among other things, we will build the wall!" - saw the Mexican peso reverse Monday/Tuesday gains.

Big day planned on NATIONAL SECURITY tomorrow. Among many other things, we will build the wall!

9.04am GMT

German government bond prices are falling this morning, pushing the yield (or interest rate) on bunds to a six-week high.

That shows that investors are moving money out of safe-haven assets and into shares.

Bunds are getting completely ironed out

8.58am GMT

The pound is holding firm at $1.252 this morning, as the City waits for the government to publish its bill on exiting the European Union.

Nice to see the UK Pound hold above US $1.25 and move to 1.168 versus the Euro #GBP #BoE

8.57am GMT

The pan-European Stoxx 600 index has gained almost 1% this morning, putting it on track for its biggest gain of 2017.

Solid earning figures from Santander, which posted a 4% increase in revenue, are helping the mood.

8.40am GMT

Britain's FTSE 100 index of blue-chip shares has gained nearly 0.7% this morning, as it gains 48 points to 7199.

Copper in particular up on restricted supply (BHP Billiton cut guidance; prolonged strikes could make matters worse) and growth/inflation expectations from US infrastructure spending plans as Trump sticks to his campaign hymn sheet.

Aluminium, Iron Ore, Lead and Zinc are all tagging along while Oil holds around $53/55, near the mid-point of a $50-60 range as US production increases challenge OPEC cuts.

8.24am GMT

Traders have a lot to fret about right now, from Donald Trump's protectionist threats to Britain's push towards Brexit.

But today, shares are rising on optimism that the global economy may strengthen this year, as Trump starts to delivers on fiscal stimulus boost he promised during his campaign.

"I think the real lift in the market was the second round of executive orders from the White House.

This is very much a Trump-infrastructure rally."

Good morning from Berlin. The Trump trade is in full swing again. Stocks in Asia joined a global rally on investors' optimism in econ growth pic.twitter.com/Cv9KggD8HT

US stock markets have showed renewed signs of life this week, and the Nasdaq made a fresh record high on Tuesday as the market toyed with the idea of reigniting the 'Trump rally' that we saw in the aftermath of the presidential election last November.

Based on Tuesday's performance, it looks like the market is happy with the first flourish of Trump's executive orders.

7.53am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Here's what's coming up today.

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