Wall Street hits record high
Newsflash: The US stock market has opened at a new alltime high, as investors react to Donald Trumpâs stunning electoral win.
Investors are racing into riskier assets, following the Republicansâ win in the race for the White House, and their taking. control of the Senate too.
Bloomberg TV are calling it a âface-ripping rallyâ
The S&P 500, the broad index of US stocks, has jumped by 1.9% to a new intraday high.
The Dow Jones industrial average, of 30 large US companies, jumped by 3% to 43,508 points, also hitting a record high.
The tech-focused Nasdaq is slightly lagging behind in the face-ripping stakes, up 1.8%.
Investors are betting that Trumpâs economic policies will stimulate growth, and also inflation (as new tariffx, tax cuts and immigration curbs are all potentially inflationary).
Richard Flax, chief investment officer at Moneyfarm,
The resurgence of a newly empowered Trumpâcommanding strong support across the popular vote, the Senate, and the Houseâsignals that this will be a pivotal presidency for at least the near term. With a more compliant Republican Party following the departure of sceptics, Trump is now positioned to govern more freely and in line with his vision.
We anticipate a return to core policies such as tax cuts and deregulation, coupled with Trumpâs characteristic protectionist and isolationist stanceâfactors likely to influence everything from inflation to supply chain dynamics. The immediate market response reflects this, with a strengthening dollar, rising equity markets, and gains in Nasdaq 100 and S&P 500 futures. Additionally, the 10-year Treasury yield is pushing higher as investors adjust to expectations of these policies.
While we still expect the Fed to enact a rate cut this year, Trumpâs anticipated inflationary pressures may lead the FOMC to take a more cautious, wait-and-see approach in early 2025, assessing the impact of the new administration before further action.â
Key events
The spectre of stagflation is haunting financial markets today, as investors calculate that Donald Trumpâs plans for tax cuts, blanket tariffs and an immigration clampdown would lift inflation pressures and hurt growth.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, explains:
ââFresh nervousness has been sweeping financial markets after Donald Trumpâs triumphant win. His policies look set to increase inflationary pressures and swell the US deficit even further, with knock-on effects expected for the UK economy. 10-year treasury yields have jumped as traders assess the impact that the twin promises of tariffs and tax-cuts will have on the price rises and on US government debt levels.
Gilts often move in tandem with treasuries and this special relationship is playing out today, pushing up UK borrowing costs sharply, with 10-year gilt yields rising to the highest level since the Financial Crisis in 2008. UK government bonds had already been skittish, with sentiment souring after concerns about the amount of borrowing the Labour administration was taking on. Now Trumpâs win has piled on further pressure
Concerns about the inflationary knock-on effect of the fresh wave of tariffs promised by Trump are seeping through the markets. There is also concern that his trade policies could hold back Britainâs economic growth. The fear of a stagflation scenario emerging in some economies appears once again to be stalking markets..
Reeves: We’ll make strong representations to US about importance of free and open trade
Richard Partington
UK chancellor Rachel Reeves has told MPs this afternoon that itâs too early to start making changes to forecasts for our economy, because of the US presidential election.
Testifying to the Treasury committee, Reeves adds:
But i would say this, our trading relationship, our economic relationship with the US, is absolutely crucial. The US is the single biggest trading partner, trade between our two countries of, I think, £311bn a year. So of course that relationship is crucial. And of course our special relationship goes much beyond trade, for our security and defence relationship as well
âIâm confident those trade flows will continue under the new president and indeed president trump has been president of the US before and we continue to have a strong and healthy economic relationship
âThe US also benefit from that access to free and open trade with us and other countries around the world, and its what makes us richer as societies to benefit from thatâ
Reeves also said she would make âstrong representationsâ about the importance of free trade to Donald Trumpâs incoming administration.
âItâs a trade relationship with the United States and we will make strong representations about the importance of free and open trade, not just between ourselves and the United States but globally.â
Yup:
The stock market is celebrating Trump’s win as the S&P 500 pops to a new record high, but the bond market doesn’t look happy as the 10yr Treasury yield continues to rise sharply this morning: pic.twitter.com/z4iIzAmWsO
— James Picerno (@jpicerno) November 6, 2024
Although equities are surging today, traders are also noting that US bond prices are falling sharply.
Thatâs pushed up the interest rate (or yield, in market jargon) on 10-year US Treasury bills to 4.45% today, up from 4.28% last night.
Thatâs the highest level since 1 July.
As bond yields rise when prices fall, this shows that investors are demanding a higher rate of return for holding US government debt;.
They may be judging that more bonds will need to be issued if Trump cuts taxes â or simply that Trumpâs economic measures will drive up growth, meaning long-term interest rates will be higher.
In the immediate election aftermath, price action is as follows: stocks are +2%, 10y Treasury yields are +20bps, the US dollar is +1-2% against most currencies, and gold is down 2-3%. Suggests investors are pricing in higher real growth, not inflation. pic.twitter.com/cUzvtVI3VV
— Liz Young Thomas (@LizThomasStrat) November 6, 2024
European stock markets have now fallen into the red, hit by fears that Donald Trump will impose new tariffs on European exports into the US.
Germanyâs DAX is now down 1%, with the countryâs carmakers hit by trade war worries.
Franceâs CAC 40 has lost 0.5%, while the Italian FTSE MIB is down 1.5%.
As Neil Wilson of Markets.com puts it (quoting Trump):
The early positivity in Europe has evaporated as quickly as you can say âtariffs are my favourite wordâ.
Trump and the Republicansâ electoral triumph is set to cause short-term market gains, predicts Kate Leaman, chief market analyst at AvaTrade.
The incoming president has historically been a market-friendly candidate, focusing on policies that benefit corporations and investors. A Trump administration would likely continue lowering corporate taxes, boosting large corporations like Apple or Amazon and helping to drive their stock prices higher.
âAlong with more market-friendly policies, Trumpâs win is also likely to lead to aggressive deregulation, with the combination driving stronger short-term gains across US equities, especially in sectors like industrials, financials and healthcare â all of which thrived during his first term. A Republican win will also likely mean less regulation and more support for fossil fuels, benefiting traditional energy companies and presenting a challenge to the renewable sector.
Photos: Trump hats, and a t-shirt at the NYSE
There are signs of support for Donald Trump on the US stock exchange trading floor today:
Euro on track for worst day since pandemic
The US dollar is continuing to strengthen, pushing the dollar index (the greenback against a basket of currencies) up by 1.8% today.
This has left the euro on track for its fourth worst day in the last nine years.
The euro has tumbled by two cents, or 1.87%, against the US dollar today to $1.0725, down from $1.093 last night, before US polls closed and the first election results came through.
That would be the euroâs biggest percentage fall since 19 March 2020, when it fell by 2.04% when the Covid-19 pandemic sparked a race into safe haven assets such as the dollar.
It lost 2.37% on 24 June 2016 after Britain voted to leave the European Union, and 1.88% on 14 June 2018, when the European Central Bank left interest rates at record lows.
As flagged earlier, US bank stocks are big beneficiaries of Donald Trumpâs election win.
Goldman Sachs are the top riser on the Dow Jones industrial average, up 10.25%, followed by JPMorgan Chase who are up 8.6%.
US banks will benefit from higher interest rates, if the US Federal Reserve is now more reluctant to cut borrowing costs
Theyâre followed by construction equipment maker Caterpillar, up 6.3%,
Elon Musk’s Tesla stake surges by $15bn
Shares in Tesla have surged by 14.5% in early trading.
That lifts them from $251.44 last night to $286.50 in early Wall Street trading today. That pushes up Teslaâs market capitalisation by around $112bn, from $807bn to $919bn.
This rally is a boost to Elon Muskâs wealth.
The value of his 12.8% stake in Tesla has risen from $103bn last night, to around $118bn, meaning Muskâs stake is worth about $15bn more than before the election result.
Having backed Trump during the election campaign, Musk could now benefit from the result, analysts say, perhaps if the next president imposes tariffs on electric vehicles made in China.
Trump has also pledged to form a government efficiency commission, led by Musk.
Small US stocks are also rallying, lifting the Russell 2000 index of smaller companies by 4% to the highest since 2021.
The decisive nature of Trumpâs win appears to be driving the US stock market up.
David Morrison, senior market analyst at fintech and financial services provider Trade Nation, says:
Ahead of the vote, the major concern was that the result would be drawn out and disputed. This led to a jump in volatility and a sell-off across risk assets. As it happens, there has been no uncertainty.
Donald Trump looked like the clear winner within a few hours of the polls closing. US stock indices had already posted a strongly positive session on Tuesday, making back most of the losses from the end of last week. It appeared that many traders were convinced that the polls were understating the positive momentum which showed up in Trumpâs numbers over the last fortnight. But itâs worth pondering whether the strength of the stock market rally is due to Trump winning, or relief that thereâs a clear and uncontested result. In truth, itâs probably a bit of both.
Wall Street hits record high
Newsflash: The US stock market has opened at a new alltime high, as investors react to Donald Trumpâs stunning electoral win.
Investors are racing into riskier assets, following the Republicansâ win in the race for the White House, and their taking. control of the Senate too.
Bloomberg TV are calling it a âface-ripping rallyâ
The S&P 500, the broad index of US stocks, has jumped by 1.9% to a new intraday high.
The Dow Jones industrial average, of 30 large US companies, jumped by 3% to 43,508 points, also hitting a record high.
The tech-focused Nasdaq is slightly lagging behind in the face-ripping stakes, up 1.8%.
Investors are betting that Trumpâs economic policies will stimulate growth, and also inflation (as new tariffx, tax cuts and immigration curbs are all potentially inflationary).
Richard Flax, chief investment officer at Moneyfarm,
The resurgence of a newly empowered Trumpâcommanding strong support across the popular vote, the Senate, and the Houseâsignals that this will be a pivotal presidency for at least the near term. With a more compliant Republican Party following the departure of sceptics, Trump is now positioned to govern more freely and in line with his vision.
We anticipate a return to core policies such as tax cuts and deregulation, coupled with Trumpâs characteristic protectionist and isolationist stanceâfactors likely to influence everything from inflation to supply chain dynamics. The immediate market response reflects this, with a strengthening dollar, rising equity markets, and gains in Nasdaq 100 and S&P 500 futures. Additionally, the 10-year Treasury yield is pushing higher as investors adjust to expectations of these policies.
While we still expect the Fed to enact a rate cut this year, Trumpâs anticipated inflationary pressures may lead the FOMC to take a more cautious, wait-and-see approach in early 2025, assessing the impact of the new administration before further action.â
Gold and silver had been seen as beneficiaries of the Trump trade in the run-up to the US election, but both are actually falling today.
The gold price has dropped by 2.7% to $2,669 per ounce, its lowest since mid-October.
Silver has dropped by over 5% to around $31 per ounce, also around a three-week low.
This will be partly due to the strength of the US currency (a strong dollar means you need fewer of them to buy a commodity).
Samer Hasn, senior market analyst at XS.com, says:
Gold is retreating significantly today, falling below $2,700 per ounce in spot trading at the peak of the declines, erasing Novemberâs gains.
The drop in gold prices comes as the US dollar and Treasury yields are on track to record their biggest daily gain this year as Donald Trump returns to the White House for a second time.
Irish Prime Minister Simon Harris has warned that that the risk of a transatlantic trade shock is rising.
Harris made the comments shortly after congratulating Donald Trump on his election as U.S. president, Reuters reports.
â IRISH PM SAYS RISK OF A TRANSATLANTIC TRADE SHOCK IS RISING
— PiQ (@PiQSuite) November 6, 2024
Harris was speaking in parliament in relation to his governmentâs policy of partly setting aside big budget surpluses. in a new sovereign wealth fund, saying it was doing so âat a time when the risk of a transatlantic trade shock is rising.â
Taoiseach Simon Harris has congratulated Donald Trump: âThe people of the United States have spoken and Ireland will work to deepen and strengthen the historic and unbreakable bonds between our people and our nations in the years ahead.âhttps://t.co/DYMTbQqeSm
— The Irish Times (@IrishTimes) November 6, 2024