Global Markets React to Trump’s Return to White House
As investors weigh the implications of Donald Trump’s return to the White House, Asian markets took a step back on Thursday. This comes after US stocks surged to record highs on Wednesday, fueled by expectations of Trump’s economic policies.
Asian Markets Retreat
Japan’s Nikkei 225 index fell 0.6% to 39,246.86, while South Korea’s Kospi declined 0.4% to 2,554.57. Australia’s S&P/ASX 200 edged 0.1% lower, to 8,191.00. Chinese shares also felt the pressure, with Hong Kong’s Hang Seng dropping 0.7% to 20,386.36 and the Shanghai Composite index falling 0.7% to 3,359.99.
Tariffs and Trade Wars
Trump’s promise to impose blanket 60% tariffs on all Chinese imports has investors on high alert. This move could add to the burdens Beijing is facing as it struggles to revive slowing growth in the world’s second-largest economy. Higher tariffs on imports from China, Mexico, and other countries also raise the risk of trade wars and disruptions to the global economy.
US Markets Soar
On Wednesday, the US stock market, Elon Musk’s Tesla, banks, and bitcoin all surged higher as investors bet on the potential benefits of Trump’s economic policies. The S&P 500 rallied 2.5% to 5,929.04, its best day in nearly two years. The Dow Jones Industrial Average surged 3.6% to 43,729.93, while the Nasdaq composite jumped 3% to 18,983.47.
Impact of Trump’s Policies
The impact of Trump’s second term will likely depend on whether his fellow Republicans win control of Congress. Investors see Trump’s policies potentially leading to stronger economic growth, which could push prices down and yields up for Treasurys. Tax cuts under Trump could further swell the US government’s deficit, increasing borrowing and forcing yields even higher.
Interest Rates and Inflation
The yield on the 10-year Treasury jumped to 4.43% from 4.29% late Tuesday, a major move for the bond market. Investors expect Trump’s policies, particularly higher tariffs, to fan inflation and add costs to US household bills. Sharp cutbacks in immigration could also leave businesses shorthanded, forcing companies to raise wages for workers faster and put more upward pressure on prices.
Federal Reserve Decision
The Federal Reserve will announce its latest decision on interest rates on Thursday, where the expectation is still for a cut. However, traders are already paring back forecasts for how many cuts the Fed will provide through the middle of next year.
Currency and Commodity Markets
In other dealings early Thursday, the US dollar was holding steady against the Japanese yen, at 154.63. The euro slipped to $1.0728 from $1.0730. U.S. benchmark crude oil gained 2 cents to $71.71 per barrel. Brent crude, the international standard, was up 24 cents at $75.16. The price of bitcoin slipped to $76,165 after hitting an all-time high above $76,480 on Wednesday.
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