Donald Trump’s victory in the US presidential election causes a whirlwind on global markets on Wednesday, sending the dollar, bitcoin, US stocks and rates soaring when European stock indices end their roller coaster ride in the red.
Wall Street welcomes Donald Trump’s victory with fanfare. Around 4:45 p.m. GMT, the Dow Jones soared by 3.13%, the Nasdaq index by +2.37% and the broader S&P 500 index by +2.08%. From the opening, Dow Jones and S&P 500 set new session records.
The election of the Republican candidate propelled a certain number of assets, such as the action of the Tesla group (+12.97% around 4:45 p.m. GMT), owned by Elon Musk, an active support of Trump. American oil stocks are also gaining ground when groups specializing in renewable energies are losing ground.
In Europe, Frankfurt (-1.13%), Milan (-1.54%) and London (-0.07%) finished in the red after a complete reversal of the trend. The CAC 40 in Paris even briefly jumped by more than 2% at the start of the session before ending down 0.51%.
Investors were initially relieved by the “removal of uncertainty” with a clear election result, said Christophe Boucher, investment director at ABN AMRO Investment Solutions. “The most pessimistic scenario – Trump contesting the results – is avoided.”
But European investors now realize that if the Republican’s program is implemented, “it could be devastating for Europe, with risks to growth and inflation”, underlines Lionel Melka, manager at Swann Capital interviewed by the ‘AFP.
The next president wants to increase import taxes to between 10 and 20% for all products entering the United States, and up to 60% for those coming from China, or even 200% for certain types of goods.
Soaring rates
On the bond market, the interest rate on 10-year US government bonds jumped to 4.46% around 4:45 p.m. GMT on Wednesday, compared to 4.27% at the close on Tuesday, and that with a two-year maturity rose to 4 .28%, compared to 4.18%.
The shares of American banks are particularly celebrating, driven by the surge in borrowing rates. JP Morgan jumped 9.66%, Bank of America 7.50%, Citigroup 8.81%, Goldman Sachs 12.38% and Wells Fargo 13.85%.
This is a sign that “investors are preparing for a scenario in which the Federal Reserve (Fed) could be required to relaunch its fight against inflation,” explains Ricardo Evangelista, analyst at ActivTrades. In other words, it could slow down its rate reduction pace, or even pause the cycle.
The Fed’s monetary policy meeting began on Wednesday and concludes on Thursday.
Dollar surge
The greenback soared in the wake of the victory of the Republican candidate, whose program “could reinforce inflationary pressures and slow down the pace of rate cuts by the Fed compared to other central banks”, underlines Fawad Razaqzada, analyst at City Index.
Against the euro, the greenback even briefly soared by more than 2%, a particularly significant variation for the foreign exchange market. The Dollar Index, which compares the American currency to a basket of currencies, reached its highest level since the beginning of July on Wednesday, at more than 105 points.
“In Mexico, concern over possible increases in customs tariffs is causing the peso to plunge,” analysts at Saxo Bank also noted.
Bitcoin’s all-time high
Bitcoin surpassed the $75,000 mark for the very first time on Wednesday, boosted by the prospect of regulatory relaxation and tax measures favoring the cryptocurrency sector under the presidency of Donald Trump.
The first digital currency gained 7.69%, to $74,483.26 around 4:45 p.m. GMT, shortly after reaching a new historic high at $75,371.67.
Concerns over raw materials
The return of Donald Trump to the White House also revives concerns for American soybeans, whose prices fell on Wednesday, in an uncertain market facing a potential escalation of trade tensions with China, the main destination for American oilseeds.
Oil is also hesitant in the face of Trump’s victory, with the rise in the greenback weighing on demand for crude. Fawad Razaqzada also expects a “potential increase in drilling activity (in the United States), which could lead to an increase in American oil production”, enough to weigh on prices.
Furthermore, a trade war with China, the leading importer of black gold, could worsen the slowdown in oil demand.
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