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Stocks rise, Treasuries under pressure as Trump impact weighed
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Stocks rise, Treasuries under pressure as Trump impact weighed
Nov 7, 2024 2:47 AM

TOKYO/LONDON (Reuters) -World stocks gained on Thursday after a record rise for U.S. shares overnight, and U.S. Treasuries remained under pressure as investors processed a second Donald Trump presidency, ahead of policy decisions from the Fed and other major central banks.

Europe's broad STOXX 600 index was last up 0.5% after Asian shares had gained earlier in the day, with even onshore Chinese blue chips rising 3% as investor optimism over potential stimulus outweighed concerns about worsening trade tensions. [.SS] [.EU]

U.S. stock futures pointed higher after all three major Wall Street indexes surged to all-time peaks on Wednesday on the possibility of a Republican sweep that could quickly usher in big fiscal spending. [.N]

Stocks are "rewarding the presumed likelihood of corporate tax cuts and perceiving a general penchant toward deregulation across industries as positive for earnings," said Naomi Fink, chief global strategist at Nikko Asset Management.

"On the other hand, bond markets have responded unfavourably, with yields rising on the prospect of a united front between executive and legislative arms of government with respect to fiscal expansion."

"This comes at a time when US debt-to-GDP is already at historic highs near 120% and budget deficits already exceed 6% of GDP," she said.

The benchmark 10 year yield was last 4.42%, flat on the day, after a 13 basis point rise Wednesday, and the 30-year yield was last 4.61%, a touch higher after the previous day's 15 bp jump. [US/]

That helped lift the dollar to its biggest one-day gain in more than two years on Wednesday, although the currency eased back slightly on Thursday, and was down 0.3% against a basket of its peers.

The euro was up 0.3% at $1.0762, after Wednesday's 1.8% fall, also not helped by political turmoil in Germany where Chancellor Olaf Scholz sacked his Finance Minister Christian Lindner, causing the ruling three-party coalition to collapse and setting the stage for a snap election early next year. [FRX/]

CENTRAL BANKS

The day's main scheduled macro economic event is the Federal Reserve meeting later in the day. Markets were still confident of a 25 basis-point cut on Thursday, but slightly reduced bets on further easing in December.

Longer term, Trump's proposed tariffs and immigration policies risk stoking inflation, potentially hampering the path to lower rates.

Before that is the Bank of England. It too is likely to cut interest rates by a quarter point on Thursday for only the second time since 2020, but the big question for investors is whether the BoE sends a signal about its subsequent moves after the government's inflation-raising budget.

Sterling rose 0.3% to $1.2915, following a 1.24% slide on Wednesday. [GBP/]

Central banks in Norway and Sweden also met Thursday, though they met markets expectations and did little to disrupt currency markets. The Norges Bank at the hawkish end of the developed market spectrum kept rates unchanged at a 16-year high, and the Riksbank cut by 50 bps.

Bitcoin caught its breath on Thursday, easing 1.3% to $74,990, following its vault to a record high $76,499.99 overnight. Trump had vowed to make the United States "the crypto capital of the planet".

Gold remained under pressure following Wednesday's more than 3% tumble at $2,662 an ounce. However, that was still not far from its recent record high of $2,790.15. [GOL/]

Crude also succumbed to dollar strength on Wednesday, but stemmed losses Thursday supported by risks to oil supply from a Trump presidency and a hurricane building in the Gulf Coast. [O/R]

Brent crude oil futures fell 0.35% to $74.66 per barrel. U.S. West Texas Intermediate (WTI) crude shed 0.6% to $71.25.

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