Global markets rose on Wednesday morning after Donald Trump closed in on victory in the 2024 US presidential election.
At the same time, the US dollar index hit its highest point since July, rallying against other global currencies, while the euro fell on expectations of increased tariffs on European goods.
“With the Republican party on the cusp of a clean sweep of Congress and the presidency, US markets are rallying. This is less an endorsement of every facet of the Republican manifesto, but because markets like visibility, and clear governmental control provides that”, says Michael Field, European market strategist at Morningstar.
“We are likely in for a busy, and eventful four years, with Trump knowing that he needs to hit the ground running and get policy changes done while Republicans control the two houses. The euro is down, and rightly so given the likelihood of at least some of these policies negatively affecting the region. Expect a brief pause after the results, before the real action begins. ”
In his first speech, Donald Trump thanked supporters for electing him as the 47th president, claiming to have won both the popular vote and Electoral College with more than 300 votes. Cryptocurrencies, which are considered part of the so-called Trump trade, rallied as well. Bitcoin surpassed $75,000, topping its previous all-time peak reached in March. Donald Trump has voiced his support of cryptocurrencies in the past.
The 10-year Treasury yield surged to around 4.43% on speculation Trump’s proposed tax cuts and other spending plans would increase the fiscal deficit, while possible tariffs could reignite inflation.
Oliver Blackbourn, multi-asset portfolio manager at Janus Henderson, expects more stimulus for the US economy, but the scale will be dependent on whether the Republican party takes full control of Congress.
He also noted the broad based rally in global stock markets.
“Perhaps the most surprising outcome so far is the strength of stock markets outside of the US. European and Japanese equities are performing well, and the downside in China is perhaps less than many had feared, despite the incoming President’s threats to global trade.”
There were mixed reactions from European stocks on Wednesday: Ozempic maker Novo Nordisk, which has a large revenue exposure to the US market and reported positive earnings Wednesday morning, jumped 8% at the open. But wind turbine exporters like Vestas and Orsted fell amid fears over reduced investment in renewable energy climate transition and tariffs on European manufacturers.
In the UK, the FTSE 100, with its high proportion of dollar earners, gained nearly 2%, aided by pound weakness against the dollar. US-exposed stocks like Ashtead, Rolls-Royce and BAE Systems were the biggest risers.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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