Stock markets experienced significant gains as optimism grew around potential monetary easing by the Federal Reserve following Donald Trump’s inauguration. Wall Street indices, along with European markets, reached new highs amid positive investor sentiment fueled by a constructive dialogue between Trump and China’s Xi Jinping. Corporate developments included discussions of a merger between Glencore and Rio Tinto, while Novo Nordisk’s stocks fell due to price negotiations for drugs. Additionally, Bitcoin surged as Trump signaled interest in cryptocurrency.
Positive Market Trends Ahead of Trump’s Inauguration
Stock markets wrapped up the week with encouraging gains on Friday, as investors expressed optimism regarding the continuation of monetary easing by the U.S. Federal Reserve (Fed) in the wake of Donald Trump’s upcoming inauguration.
On Wall Street, the Dow Jones surged by 0.78%, the Nasdaq experienced a notable increase of 1.51%, and the broader S&P 500 index rose by 1.00%.
Across Europe, the London Stock Exchange climbed by 1.35%, achieving a new record high during the session at 8,533.43 points, surpassing its previous peak from last May. Frankfurt saw a similar trend, with a rise of 1.20%, hitting a new milestone at 20,924.50 points, inching closer to the 21,000-point mark.
Investor Sentiment and Market Reactions
Paris also joined the upward momentum with a 0.98% gain, while Milan increased by 1.25%. In Zurich, the SMI saw a modest rise of 0.40%. Investors are keenly anticipating Donald Trump’s return to power, eager to discern the potential implications for trade and tax policies.
According to Thierry Claudé, a manager at Kiplink, “The markets are giving him credit. Everyone expects a favorable fireworks display in the early days of his presidency.”
A recent phone conversation between Trump and Chinese President Xi Jinping, where both leaders expressed intentions to “solve many problems together,” was positively received by the markets, further fueling investor optimism.
Additionally, trading volumes were notably high on this “triple witching” Friday, characterized by the expiration of numerous contracts and options, prompting various position adjustments.
Market optimism was also bolstered by the release of several inflation indices throughout the week, including the Consumer Price Index (CPI) on Wednesday, which may influence the Fed’s rate-cutting strategy. Fed governor Christopher Waller noted on Thursday the possibility of “three or four” rate cuts this year.
Looking ahead to the Fed’s upcoming meeting on January 28 and 29, most market participants anticipate that rates will remain steady, ranging between 4.25% and 4.50%, as indicated by data from the CME Group’s FedWatch tool.
Following the inflation data release, there was a significant shift as “bond yields have significantly improved in recent days and stocks followed suit,” stated Steve Sosnick of Interactive Brokers. The yield on ten-year U.S. Treasury bonds stabilized at 4.62%, having previously peaked at 4.79% earlier in the week, marking the highest level since October 2023.
In corporate news, Bloomberg reported on Friday that commodity trading giant Glencore (+2.84% in London) and Anglo-Australian mining company Rio Tinto (+2.14% in London) have entered preliminary discussions regarding a potential merger. Both companies declined to comment on market speculation.
On the downside, Danish pharmaceutical leader Novo Nordisk saw its stocks decline (-4.34% in Copenhagen; -5.27% in New York) following the Biden administration’s announcement to negotiate prices for a new list of 15 drugs, including its popular products Ozempic and Wegovy.
Conversely, semiconductor manufacturer Intel’s stock surged by 9.25% in New York, spurred by reports of an undisclosed company interested in acquiring the firm.
In commodities, Brent crude oil prices for March delivery fell by 0.62%, settling at $80.79, while West Texas Intermediate crude for February delivery dropped by 1.02% to $77.88.
As of 21:50 GMT, in the foreign exchange market, the U.S. dollar appreciated by 0.30% against the euro, trading at 1.0270 euros per dollar. Additionally, Bitcoin rose by 4.68% to $104,825, fueled by reports suggesting that Trump plans to prioritize cryptocurrency and engage industry stakeholders in his administration.