Trump's win lifts banks, small-cap shares on bets of business-friendly policy
Legacy automakers rise, smaller EVs drop
Prison operators soar, European defense stocks jump
China ADRs, U.S. renewable stocks fall
Recasts throughout with updated prices
By Medha Singh
Nov 6 (Reuters) -Donald Trump's return as U.S. president for the second time on Wednesday boosted equity markets on bets of lower corporate tax, favorable tariffs and deregulation, lifting the shares of banks, locally focused small-cap companies and Trump Media DJT.O.
His promise to make Tesla CEO Elon Musk head of a government efficiency commission after the billionaire backed Trump throughout his electoral campaign led to a 12.6% surge in the shares of the electric automaker.
The S&P 500 and the Dow were set to open at record levels, while futures tied to the small-cap Russell 2000 index RTYcv1 surged 6%.
"The market believes a Trump presidency will unleash animal spirits and give a boost to growth in the short-term through some relief on corporate taxes and deregulation," said Frédérique Carrier, head of investment strategy for RBC Wealth Management in the British Isles and Asia.
Trump Media & Technology Group, in which Trump owns a majority stake, soared nearly 37% as investors overlooked the company's latest quarterly results that showed the Truth social parent's revenue was just $1 million.
The shares have nearly tripled in value from their all-time lows in late September, and his stake was last worth about $5.4 billion. The company's nearly $9 billion stock market value is detached from its day-to-day business, analysts said.
Trump's Republican Party also secured the Senate and was making gains in the House of Representatives, potentially making it easier for the president to legislate his proposals and push through key appointments.
Markets "have priced in a pretty strong mandate for the Republicans and are biasing toward most of the Trump trades", said Scott Chronert, U.S. equity strategist at Citi.
"Policy details will be important for here as the market focus seems to be putting more emphasis on deregulation, tax cuts, and a more business-friendly backdrop."
Wall Street lenders JPMorgan Chase JPM.N, Bank of America BAC.N and Goldman Sachs GS.N jumped between 7% and 9% on prospects that improved domestic investment and looser regulations would spur deals.
Victory for Trump, who has positioned himself as pro-cryptocurrency, lifted bitcoin to a record high. Crypto-linked stocks Coinbase COIN.O, MicroStrategy MSTR.O, Riot Platforms RIOT.O, MARA Holdings MARA.O jumped between 10% and 12%.
Private prison operators Geo Group GEO.N and CoreCivic CXW.N jumped 20% and 22%, respectively, as Trump's promised crack down on illegal immigration could boost demand for detention centers.
Elsewhere, European defense stocks jumped against the backdrop of Trump's earlier threat to withdraw from NATO, saying he would not defend allies that did not raise defense budgets.
"A Trump presidency would add further impetus to accelerate European defense spending, as evidenced by his first term in 2017-21," Berenberg analysts said.
AUTOS, ENERGY AND CHINA
While Tesla shares surged on Musk-Trump proximity, stocks of other electric automakers dipped as Trump had said he would consider ending a $7,500 tax credit for EV purchases.
Rivian Automotive RIVN.O dropped 2.6% and Nikola NKLA.O slipped about 1.6%.
"Nobody is making money in EVs aside from Tesla, so the reduction or elimination of EV credits will widen Tesla's competitive moat," said Garrett Nelson, senior equity analyst at CFRA Research.
Shares of U.S. automakers Ford F.N and General Motors GM.N were up 3.3% and 1.5%, respectively.
Oil majors Chevron CVX.N and Exxon Mobil XOM.N firmed about 2% each, while U.S. renewable energy companies such as NextEra Energy NEE.N and First Solar FSLR.O plunged 6% and 14%, respectively.
Trump's presidential campaign laid out an energy policy platform centered around maximizing U.S. fuel and power output, in part by dismantling the current administration's centerpiece efforts to fight climate change.
Fears of escalation in Sino-U.S. tensions pressured U.S.-listed China shares with iShares MSCI China ETF MCHI.O dropping nearly 3%.
Import duties, including a 10% universal tariff on imports from all foreign countries and a 60% tariff on imports from China, are a key plank of Trump's policies and likely to have the biggest global impact.
For the U.S. stock market report click here
For U.S. stocks on the move click here
For story on the likely impact of Trump win on global economy click here
Investors position for a Trump win https://reut.rs/4hufcl7
Reporting by Medha Singh and in Bengaluru; Additional reporting by Aishwarya Venugopal, Zaheer Kachwala and Nathan Gomes; Editing by Arun Koyyur
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