Trump victorious: these UK stocks are also big winners

What happens in the US inevitably has a significant impact on companies and shares prices over here. City writer Graeme Evans explains why these stocks are charging higher today.

6th November 2024 12:54

Graeme Evans from interactive investor

Stocks with major US exposure today surged across the FTSE 350 index as investors positioned for tax cuts and stronger American growth under a Trump presidency.

The biggest beneficiary was Sunbelt equipment hire firm Ashtead Group (LSE:AHT), which generates about 95% of its sales in the US and rose by 374p to trade at a three-year high of 6332p.

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Investors also showed strong interest in InterContinental Hotels Group (LSE:IHG), given that it generates a majority of profit in the US and paid about 70% of its tax in the country in 2023. Shares lifted 414p to a fresh record of 8,976p.

Peel Hunt estimated before the election that each percentage point change in US corporation tax rates would change its 2024 earnings forecast by 0.3% on a pro forma basis.

The broker added: “Hotels are generally leveraged to the economic cycle and, with occupancy currently generally high, we would expect changes to GDP forecasts for the US to be amplified in growth expectations for IHG’s US business.”

Barclays (LSE:BARC) stands to benefit from a lower tax rate and Trump’s potential moves toward the de-regulation of financial services.

As well as investment banking, Barclays has 20 million retail customers in the US and works with leading brands on a range of partnerships in the world’s largest credit card market.

About 40% of group income is US dollar denominated, along with around 30% of the group’s cost base. The shares are now 65% higher this year, including today’s rise of 11.25p to 256.1p.

The current US corporation tax rate is 21% but projections suggest this could fall as low as 15% in the event of a Republican sweep in yesterday’s elections. While the Democrats are no longer in control of the Senate, the picture in the House of Representatives is more uncertain.

Saxo Bank chief macro strategist John Hardy said: “The outcome of the House elections is critical, in short, for whether we have a Trump gridlock or Trump 2.0 scenario.”

In the meantime, S&P 500 futures traded 2% higher as the US benchmark moves back within sight of a record high. Big risers will likely include Tesla Inc (NASDAQ:TSLA), with shares up 13% in pre-market dealings amid Elon Musk’s strong support for Trump.

Smaller stocks are also set to surge on Wall Street after Russell 2000 futures jumped 6% at one point on expectations that stronger domestic growth and increased M&A activity will accompany lower corporate taxes.

The performance of US retailers is likely to be more subdued given that China trade tariffs may force up the price of imported goods.

The tariffs and many of Trump’s other policies are inflationary, but economists continue to expect the Federal Reserve will cut interest rates by a further quarter point tomorrow.

The base case of UBS is for a quarter point cut in December and 100 basis points of easing in 2025, although it adds that the Fed may slow the pace of rate cuts if it perceives that changes to migration, trade or fiscal policy may lead it to fear higher inflation.

At lunchtime Wednesday, the FTSE 100 index stood 86 points higher at 8,258 with the FTSE 250 index up by 246 points at 20,616.

Among other stocks, Rentokil Initial (LSE:RTO) got much-needed support after recent setbacks following major US acquisition Terminix. The company, which generates 60% of its revenues in the US, lifted 14.9p to stand at its highest level since September at 412.5p.

In the defence sector, BAE Systems (LSE:BA.) rose 60.5p to 1,340.5p and FTSE 250-listed QinetiQ Group (LSE:QQ.) lifted 8p to 457p. The momentum behind Rolls-Royce Holdings (LSE:RR.) also resumed as the engines giant jumped 23.2p to trade at a fresh record of 583.2p.

The prospect of a deregulation agenda under Trump also benefited BetMGM joint venture gaming business Entain (LSE:ENT), which lifted 33p to 760p, and British American Tobacco (LSE:BATS) as its shares lifted 103p to 2824p.

Weaker commodity prices on the back of a stronger dollar meant Anglo American (LSE:AAL) dropped 25.5p to 2402.5p and Endeavour Mining (LSE:EDV) dipped 30p to 1655p on the FTSE 100 fallers board.

In the FTSE 250 index, traders backed stocks including Watches of Switzerland Group (LSE:WOSG), cruise ship business Carnival (LSE:CCL) and the corporate merchandise firm 4imprint Group (LSE:FOUR).

US revenues make up 45% of the Rolex retailer’s overall revenues, with its position in the high-end luxury space making it more sensitive to changes in income tax.

Peel Hunt said before the election: “Harris’s proposals to increase income taxes on individuals earning more than $400,000 per year would be damaging for the average Watches of Switzerland US consumer.

“On the other hand, Trump favouring policies that are more likely to benefit high-income earners would serve as a tailwind.”

Shares rose 17.4p to 427p, which compares with 485p seen in late September. Carnival added 654.5p to 1623p and 4imprint rose by 260p to 5350p as the Wisconsin-based firm generates almost all its revenues in the US. It should benefit from lower corporation tax, offset by higher supply costs due to proposed tariffs on goods from China.

Across the FTSE All-Share, Ferrexpo (LSE:FXPO) shares posted the largest percentage increase as traders speculated that Trump’s election boosted the chances of an end to the Ukraine war.

The Ukraine-based exporter of iron ore pellets rose 13.5p to 75.7p, having been in the range of 300-400p between late 2020 and the date of Russia’s invasion in early 2022.

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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