US shares hit record highs on Wall Street and the dollar posted its biggest gain in eight years as Donald Trump was re-elected to the White House in a historic win.
Bitcoin also hit an all-time high, following Trump’s election promise to prioritise the volatile crypto currency.
Investors were, however, betting that Trump’s plan to cut taxes and raise tariffs will push up inflation and reduce the pace of interest rate cuts.
Higher rates for longer mean investors will get better returns on savings and investments they hold in dollars.
Markets and currencies around the world shifted sharply on Wednesday following the US election news:
- The major US stock indexes soared, with banks performing particularly well
- The dollar was up by about 1.65% against a host of different currencies, including the pound, euro and the Japanese yen
- The pound sank 1.16% against the US dollar to its lowest level since August
- The FTSE 100 index, comprising the largest companies listed in the UK, rose in early trading before closing marginally down
- The euro dived 1.89% against the US dollar to its lowest level since June as the German Dax and the French CAC 40 and stock indexes closed down 1.14% and 0.51% respectively
- In Japan, the benchmark Nikkei 225 stock index ended the session up by 2.6%
- In mainland China, the Shanghai Composite Index ended 0.1% lower, while Hong Kong’s Hang Seng was down by around 2.23%
The value of Bitcoin jumped by more than $6,600 (£5,120) to an all-time high of $75,999.04.
Trump’s stance on crypto stands in stark contrast with that of the Biden administration, which has led a sweeping crackdown on crypto firms.
He pledged to make the US “the bitcoin superpower of the world”.
During the election campaign, Trump had suggested that he could fire Gary Gensler, the chair of US regulator the Securities and Exchange Commission, who has taken legal action against several crypto firms.
Trump also said he plans to put billionaire Elon Musk in charge of an audit of governmental waste.
Mr Musk has long been a proponent of cryptocurrencies and his company Tesla famously invested $1.5bn in Bitcoin in 2021although the price of the digital currency can be very volatile.
Tesla’s shares rallied more than 14% on Wednesday to a two year high. Mr Musk, Tesla’s top shareholder, has supported Trump throughout his electoral campaign.
Experts said there was turbulence elsewhere on financial markets, however, as a response to global uncertainty and Trump’s potential plans for the economy.
US bond yields, the return a government promises to pay buyers of its debts, soared on Wednesday.
A bond is essentially an IOU that can be traded in the financial markets and governments often sell bonds to investors when they want to borrow money.
The moves may suggest that investors think borrowing will rise under the new administration and are demanding a higher return for their money.
Some economists have also warned that Trump’s proposals around trade would come as a “shock” to countries around the world, including the eurozone and the UK economy.
Chancellor Rachel Reeves has said the UK would make “strong representations” to president-elect Donald Trump about the need for free and open global trade.
“The US also benefits from that access to free and open trade with us and other countries around the world, and it’s what makes us richer as societies, to benefit from that open trade,” she said.
Donald Trump has said he would dramatically increase trade tariffs, especially on China, if he became the next US president.
Ahmet Kaya, principal economist for the National Institute of Economic and Social Research (Niesr), also said the UK could be “one of the countries most affected” under such plans.
It estimates that economic growth in the UK would slow to 0.4% in 2025, down from a forecast of 1.2%.
Katrina Ell, director of economic research at Moody’s Analytics said: “Trump’s global trade policies are causing particular angst in Asia, given the strong protectionist platform on which more aggressive tariffs on imports into the US have been pledged.”
Trump’s more isolationist stance on foreign policy has also raised questions about his willingness to defend Taiwan against potential aggression from China.
The self-ruling island is a major producer of computer chips, which are crucial to the technology that drives the global economy.
Investors also have other key issues to focus on this week.
On Thursday, the US Federal Reserve is due to announce its latest decision on interest rates.
Comments from the head of the central bank, Jerome Powell, will be watched closely around the world.
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