By Amanda Cooper
LONDON (Reuters) – The quick confirmation of Donald Trump as the next U.S. president has boosted the dollar and punished the euro as investors bet on tariffs impacting trade while tax cuts could benefit U.S. businesses.
U.S. stock futures rose by nearly the most in a year, while the dollar was on track for its biggest one-day jump since 2022. Bitcoin hit record highs and government bonds were battered.
Trump’s promises to raise tariffs, cut taxes and cut regulations encouraged investors to dive into a range of assets likely to benefit from such policies.
Markets that could suffer from tighter tariffs, including those of some of the United States’ top trading partners, bore the brunt of the sell-off, which sent the Mexican peso to its lowest point in more than two years, while the euro rallied had gone to its highest level. one day drop since March 2020.
Confidence in markets was further boosted by Republicans winning control of the US Senate, meaning Trump’s party will control at least one chamber of Congress next year, part of a potential so-called ‘Red sweep’.
“It is extremely early to draw conclusions about what a Trump presidency and a possible clean sweep could mean for the US and global economies and financial markets. Higher rates would certainly mean greater inflation and less growth in global trade,” said Philip Shaw, head of the US government. economist at Investec.
“On the stock side, one of the key drivers is Trump’s promise to cut corporate taxes for companies that make goods in America. And of course we have seen a slight increase in US stock futures, and that is also being carried through to European markets.”
European shares rose, led by defense stocks and banks, while renewable energy shares fell.
The election could have far-reaching consequences for tax and trade policy, as well as for American institutions. The outcome has implications for global assets and could shape the outlook for U.S. debt, the strength of the dollar and a host of industries that form the backbone of American business.
INTEREST RATES SEEN HIGHER
“The result is a higher yield path,” said Nick Ferres, chief investment officer at Vantage Point Asset Management in Singapore. He bought bank stocks in the expectation that higher returns and stronger growth would boost their profits.
Investors sold U.S. Treasury bonds, partly on the expectation that higher rates would inevitably feed through to consumer prices, but also because Trump’s spending promises risked worsening government finances.
“Next year will be a year where there will be a lot of discussion on budget issues in the United States,” Moelis Vice Chairman and Chief Executive Officer Eric Cantor told a conference in Abu Dhabi on Wednesday as election results trickled out. in.
Meanwhile, shares in Trump Media and Technology Group rose in premarket trading, while those in Tesla, led by Trump supporter Elon Musk, rose nearly 13%.
Bitcoin rose to an all-time high, betting on a softer line on cryptocurrency regulation.
“This rally is not just about the elections; it’s about the fundamental shifts taking place in the digital financial system, of which bitcoin is the leader. People are becoming aware that traditional systems are changing,” said Nigel Green, CEO of deVere Group.
“Markets are increasingly confident that the election results will be announced and that a congressional red sweep is possible,” said Ben Emons, founder of Fedwatch Advisors in Washington.
The results so far suggested that markets had gained clarity more quickly than in 2020, when Joe Biden was declared the winner some four days after election night.
“That’s what the markets are most concerned about, that there was going to be a long, drawn-out battle over who would win,” said Jamie Cox, managing partner at Harris Financial Group.
(Additional reporting by Lewis Krauskopf, Suzanne McGee, Michelle Conlin, Nupur Anand, Chibuike Oguh, Noel Randwich, Saqib Ahmed, Saeed Azhar, Caroline Valetkevitch, Tom Westbrook, Kevin Buckland, Megan Davies, Douglas Gillison, Carolina Mandl, Lananh Nguyen, Sinead Cruise and Alex Cornwell; Writing by Michelle Price and Amanda Cooper; Editing by Paritosh Bansal, Sam Holmes, Peter Graff)
