Global Stocks Rise After U.S. Rally, Treasuries Under Pressure as Investors Digest Trump’s Return
Global stock markets gained on Thursday, buoyed by a record rally in U.S. shares the previous day, while U.S. Treasury yields remained under pressure as investors processed the implications of Donald Trump’s return to the presidency ahead of key policy decisions from the Federal Reserve and other major central banks.
Europe’s broad STOXX 600 index was up 0.5%, following gains in Asian markets, where even Chinese blue-chip stocks rose 3%. Investor optimism about potential economic stimulus in China outweighed concerns over escalating trade tensions.
U.S. stock futures pointed higher after all three major Wall Street indexes surged to record highs on Wednesday, driven by expectations of a Republican sweep that could lead to significant fiscal spending.
Optimism on Tax Cuts and Deregulation
Stocks are reacting positively to the perceived likelihood of corporate tax cuts and a broader push for deregulation under a unified Republican government. “The market is rewarding the expected fiscal stimulus and perceiving regulatory rollbacks across industries as positive for corporate earnings,” said Naomi Fink, chief global strategist at Nikko Asset Management.
However, bond markets have responded less favorably, with yields rising amid expectations of increased government spending. “This comes at a time when U.S. debt-to-GDP is already near historic highs at around 120%, and budget deficits exceed 6% of GDP,” Fink added.
The benchmark 10-year U.S. Treasury yield was last at 4.42%, unchanged on the day following a 13-basis-point rise on Wednesday, while the 30-year yield stood at 4.61%, up slightly after a 15-basis-point increase the previous day.
Dollar Surges, But Eases Slightly
U.S. stocks posted record highs on Wednesday after Donald Trump clinched a stunning victory in the 2024 U.S. presidential election, four years after losing the White House. The strong rally helped lift the dollar to its biggest one-day gain in over two years. However, the currency eased slightly on Thursday, dipping 0.3% against a basket of its peers.
The euro rose 0.3% to $1.0762 after a sharp 1.8% drop on Wednesday, partly due to political turmoil in Germany, where Chancellor Olaf Scholz sacked his Finance Minister Christian Lindner, triggering the collapse of the ruling coalition and setting the stage for a snap election early next year.
Fed, Bank of England and Other Central Banks in Focus
The main event for the day is the Federal Reserve’s meeting, with markets still expecting a 25-basis-point rate cut. However, bets on further rate cuts in December have moderated, as investors consider the potential inflationary impact of Trump’s proposed tariffs and immigration policies, which could complicate the path to further easing.
Meanwhile, the Bank of England is also expected to cut rates by a quarter point on Thursday, marking only its second rate cut since 2020. The big question for investors is whether the BoE will provide guidance on its future policy moves in response to the government’s inflation-boosting budget. The British pound rose 0.3% to $1.2915 after falling 1.24% the previous day.
Central banks in Norway and Sweden also held meetings on Thursday. The Norges Bank, known for its hawkish stance, kept rates unchanged at a 16-year high, while Sweden’s Riksbank implemented a 50-basis-point cut, in line with market expectations.
Cryptocurrencies, Gold, and Oil
Bitcoin took a breather on Thursday, easing 1.3% to $74,990 after reaching a record high of $76,499.99 the day before. Trump’s pledge to make the U.S. “the crypto capital of the planet” has been fueling optimism in the sector.
Gold remained under pressure, following a more than 3% drop on Wednesday, and was last trading at $2,662 per ounce. However, it is still near its recent record high of $2,790.15.
Crude oil prices also felt the impact of a stronger dollar on Wednesday but managed to stem losses on Thursday, supported by concerns over potential supply disruptions under a Trump administration and a hurricane brewing in the Gulf of Mexico. Brent crude oil futures fell 0.35% to $74.66 per barrel, while U.S. West Texas Intermediate (WTI) crude shed 0.6% to $71.25 per barrel.
Looking Ahead
As the world’s major markets continue to digest the implications of Trump’s policies, investors are keeping a close eye on central bank decisions and potential fiscal shifts. With the Fed and other global central banks preparing to meet, the economic landscape is set for further volatility as the new political environment begins to take shape.