Trump’s presidency lifts Wall St to record highs; dollar, government bond yields are rising

By Koh Gui Qing and Dhara Ranasinghe

NEW YORK/LONDON – Wall Street marched to record highs on Wednesday and major stock markets around the world rose, while bitcoin hit a record high and the dollar was on track for its biggest single-day jump in four years after Donald Trump was elected US president.

Trump’s decisive victory devastated long-term Treasuries and revived the ‘Trump trade’ as yields fell in anticipation that Trump will raise rates as he has promised, increasing the US deficit and inflation and Federal Reserve would cut interest rates by less than necessary. would have done differently.

Trump, 78, retook the White House in Tuesday’s election with resolute support, despite news reports and polls saying it was a closely contested election.

“In the near term, we see US equities supported by solid economic and corporate earnings growth, political clarity and interest rate cuts by the Federal Reserve,” BlackRock Investment Institute said. “In the longer term, a lot depends on how much of Trump’s agenda is implemented.”

The VIX, a measure of stock volatility that is also seen as “Wall Street’s fear gauge,” fell 21% as investors partly celebrated the clarity of the election results and snapped up risky assets across the board.

The S&P 500 Index rose 2.4%, the Dow Jones Industrial Average rose 3.4% and the Nasdaq Composite rose 2.7%. All three indexes hit record highs on Wednesday. [.N] The MSCI world stock index rose 1.3%.

Shares of electric carmaker Tesla rose 13.6% after billionaire CEO Elon Musk emerged as one of Trump’s top supporters in the final stages of his 2024 campaign.

Investors appeared to be betting that Tesla would benefit from Musk’s ties to Trump, who has said he would create a government efficiency commission headed by Musk to cut federal spending.

Shares of Trump’s social media company, Trump Media & Technology Group, rose 3.6% to $35.10, after rising as much as 42% overnight. The stock has halved in value since hitting a record high in March.

The dollar index rose 1.6% and would have its best day since March 2020.

Outside the United States, investors were decidedly less euphoric, weighed down by concerns that higher tariffs under Trump would hurt global trade and economic growth.

European shares gave up earlier gains and fell 0.5%. The Mexican peso fell to its weakest level in more than two years.

“The market is absolutely moving in line with Trump’s playbook; stocks and small caps in particular are higher on the idea that Trump will be good for US companies,” said Seema Shah, chief strategist for Principal Asset Management in London.

“In emerging markets, you see China and Europe grappling with the idea that they could face higher rates, and that US bond yields will be higher, with expectations of a higher budget deficit and higher inflation.”

U.S. borrowing costs rose mainly for longer-term bonds, indicating investor concerns about the trajectory of U.S. budget deficits.

The yield on ten-year government bonds rose by 16.2 basis points to 4.4551%, the largest one-day increase in almost seven months.

The yield on 30-year government bonds rose 18.5 basis points to 4.6339%, the biggest single-day increase since the pandemic-induced volatility of March 2020. [US/]

While markets were still confident the Federal Reserve would cut rates by 25 basis points at the end of the two-day meeting on Thursday, they slightly lowered expectations for further easing in December.

“The big challenge for markets is that if you implement tariffs, you have to balance the short-term nature of inflation risks with the medium-term aspect of lower growth,” said Justin Onuekwusi, chief investment officer at investment firm St. James’s Place. “It seems like inflation is on the market’s mind right now.”

In contrast, European government bonds recovered and the yield on German two-year bonds fell by 11 basis points to 2.19%, while money markets priced in lower interest rates from the European Central Bank.

“For European businesses, Trump’s return to the White House would mean significant trade policy and geopolitical uncertainty, with negative consequences for growth on the continent,” said Holger Schmieding, chief economist at Berenberg.

CURRENCY WINNERS AND LOSERS

Bitcoin emerged as one of the clear winners of the day.

The cryptocurrency climbed to an all-time high of $75,459 and was last up 9%. Trump is seen as a more active supporter of cryptocurrencies than the Democratic candidate, Vice President Kamala Harris.

In traditional currencies, the euro was hit by potential tariffs and the growing difference between US and European rates. It was last down 1.7% at $1.0740, which would be the biggest daily fall since the 2016 Brexit referendum and faster than sterling’s 1.3% decline.

The dollar rose 1.9% to 154.43 Japanese yen, and rose 1.4% against the offshore yuan to 7.1969 yuan, amid reports that Chinese banks were selling dollars to stem the yuan’s decline. slow down.

China is seen as one of the front lines of tariff risk, and its currency in particular is trading on tension, with implied volatility against the dollar around record highs.

Chinese stock markets have risen to their highest levels in almost a month as investors expect a meeting of top policymakers in Beijing this week to approve refinancing and spending on local government debt. China’s blue chips lost early gains and flatlined, and Hong Kong stocks fell more than 2%.

The Mexican peso briefly fell for the first time since August 2022 to a low of 20.8038 per dollar, more than 3% below its previous close – the biggest drop since last summer’s Mexican elections shook domestic assets.

Ukraine’s international government bonds rose nearly 2 cents, boosted by bets that a second Trump term could lead to a quicker end to Russia’s war in Ukraine.

The sharp rise in the dollar put pressure on oil prices and other commodities, as they became more expensive when purchased in other currencies. [O/R]

U.S. crude rose 0.2% to $72.14 a barrel, while Brent fell 0.4% to $75.17.

Gold prices fell 2.8% to $2,668.26 per ounce, after a recent record peak of 2,790.15 [GOL/].

This article was generated from an automated feed from a news agency without any changes to the text.