A look at the day ahead in Wayne Cole’s European and global markets.
It was a wild ride for the markets, with the dollar and Wall Street futures soaring, while US government bonds took a hit as early presidential election results favored Republican Donald Trump.
Several key battleground states had yet to be announced, but betting sites were heavily in Trump’s favor and the NY Times real-time forecast predicted a 91% chance of him winning.
Analysts generally believe that Trump’s plans for limited immigration, tax cuts and sweeping tariffs, if implemented, would put more upward pressure on inflation and bond yields than Harris’ center-left policies.
Trump’s proposals would also cause the dollar to rise and potentially limit how far U.S. interest rates can ultimately be cut.
While markets were still confident that the Federal Reserve would cut rates by 25 basis points on Thursday, futures for next year were in the red with an 8-point drop in December.
The risk of higher Fed final rates, combined with the prospect of widening budget deficits, will put pressure on government bonds, pushing 10-year yields to a four-month high and two-year yields to a three-month high. Ten-year yields last rose 17 basis points to 4.449%, the sharpest increase since April. [US/]
The jump in yields fueled bullish bets on the dollar, which saw its biggest daily gain since early last year. The euro, yen and Swiss franc all fell more than 1%, while the traded Australian and New Zealand dollars fell to a three-month low. [USD/]
There are also fears that Trump would continue with his plans to impose punitive tariffs on Chinese goods.
Wall Street looked ahead to promised tax cuts and less corporate regulation, with Nasdaq up 1.2% and Nasdaq up 1.3%.
European stock futures were less enthusiastic as Trump’s tariff policy, if implemented, could spark a global trade war and threaten EU exports.
There was also the risk that Trump would withdraw from NATO, forcing Europe to spend more on defense while encouraging Russia in its territorial ambitions.
Key developments that could impact the markets on Wednesday:
– EZ services PMIs for October, producer prices for September
– German industrial orders for September
– US Services PMI for October
(by Wayne Cole; editing by Edmund Klamann)
