Wall Street is set for a strong start as Donald Trump’s election win suggests a shift in economic policies, potentially influencing global markets. Futures indicate significant gains for major U.S. indices, while European markets see mixed movements. Trump’s agenda may increase the budget deficit and impact inflation, prompting the Federal Reserve to maintain higher interest rates. The dollar has strengthened, commodities like oil have declined, and specific stocks are reacting variably to the election outcome.
Wall Street Set for a Strong Opening Following Trump’s Victory
PARIS (Reuters) – Wall Street is poised for a robust opening on Wednesday, reflecting positive momentum in European stock markets mid-session. The victory of Republican candidate Donald Trump in the recent American elections signals a potential shift in economic policies that could have widespread global implications.
Market Reactions and Key Economic Indicators
Futures for New York indices indicate a substantial surge for Wall Street, with the Dow Jones projected to rise by 3.02%, the Standard & Poor’s 500 up by 2.23%, and the Nasdaq climbing by 1.8%.
In Paris, the CAC 40 index has increased by 0.21%, reaching 7,422.83 points as of 13:49 GMT. Meanwhile, the Dax in Frankfurt has seen a slight uptick of 0.03%, and the FTSE in London has advanced by 0.62%.
The pan-European FTSEurofirst 300 has gained 0.57%, while the EuroStoxx 50 declined by 0.41%. Overall, the Stoxx 600 index has increased by 0.19%.
Donald Trump’s win over the outgoing Democratic Vice President Kamala Harris, alongside the Republican Party’s potential majority in both the House of Representatives and the Senate, has fueled optimism among investors.
Among Trump’s proposed economic initiatives are significant tax cuts for corporations, enhanced budget support, and the introduction of trade barriers, all of which could stimulate U.S. growth and inflation while impacting trade-dependent economies.
As a result, American stocks are reacting positively to Trump’s electoral victory, and the eurozone is witnessing a drop in bond yields, driven by concerns over an economic slowdown potentially instigated by a trade war.
Strategists at Oddo BHF note that the synchronized rise of U.S. stocks, the dollar, and interest rates, contrasted with slower growth in other global markets, indicates that many investors had anticipated a Republican victory. They suggest that price adjustments are likely in the hours ahead, with long-term implications for asset classes still uncertain.
Additionally, the Federal Reserve is set to announce its next rate decision on Thursday, and market watchers are keenly interested in the central bank’s outlook, which may lean towards a more cautious approach.
Despite recent indicators showcasing stronger-than-expected performance in the U.S. economy amid rising interest rates, Trump’s economic policies could compel the Fed to maintain a tight monetary stance to curb inflation risks.
Interest Rates and Yield Movements
U.S. bond yields have surged to their highest levels since July, as Trump’s agenda suggests an increase in the budget deficit along with higher growth and inflation, necessitating sustained elevated rates from the Federal Reserve.
The yield on the ten-year Treasury note has risen by 14.9 basis points to 4.4374%, while the two-year yield has climbed by 5.9 basis points to 4.2617%. In contrast, the yield on the German ten-year bond has decreased by 2.5 basis points to 2.406%, and the two-year rate has fallen by 9.3 basis points to 2.209%.
Key Stocks and Market Movements in Europe
On Wall Street, Tesla’s stock is surging in pre-market trading, bolstered by CEO Elon Musk’s strong support for Trump throughout the year.
In European markets, Crédit Agricole reported a net profit decline that was smaller than anticipated, leading to a 4.8% drop in its shares. Additionally, European car manufacturers with significant exposure to China are facing declines amid fears of a looming trade war, with the automotive sector index on the Stoxx 600 falling by 2.56%. Notable declines include Porsche AG at 5.81%, Volkswagen at 4.52%, Mercedes at 6.1%, and BMW at 6.36%.
Solvay’s shares fell by 5.1% after the company indicated it expects “stability” in product demand. Conversely, Siemens Healthineers announced full-year revenue and adjusted earnings before interest and taxes that met expectations, resulting in a 6.9% increase in its stock price. Security services firm Securitas reported a rise in its net profit for the third quarter, causing its shares to jump by 10.5%.
Currency and Commodity Market Trends
The dollar has surged, reaching its highest level since July, as Trump’s victory is perceived as beneficial for the U.S. currency. The dollar has strengthened by 1.79% against a basket of major currencies, while the euro has dipped by 2.07% to 1.0704 dollars, and the British pound has decreased by 1.4% to 1.2859 dollars.
In the oil market, prices are retreating under the weight of a stronger dollar and Trump’s pro-fossil fuel policies. Brent crude has fallen by 2.56% to $73.6 per barrel, while West Texas Intermediate (WTI) crude has decreased by 2.78% to $69.99.
(Written by Corentin Chappron, edited by Kate Entringer)
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