'Trump trades' surge as Trump claims victory
Adds comments
Nov 6 (Reuters) -The dollar surged and U.S. stock futures hit record highs as investors bet on lower taxes and higher interest rates as Republican Donald Trump claimed victory in the U.S. presidential election after leading vote counts in crucial swing states.
Fox News also projected Trump to win the presidency.
MARKET REACTION AT 0848 GMT
* S&P 500 e-mini futures ESc1 rose 2%
* The yield on the 10-year U.S. Treasury note US10YT=TWEB rose to a four-month high of 4.47%
* The U.S. dollar index =USD was up 1.4%
* Bitcoin BTC= hit a record high of $75,060
COMMENTS
DAVID ALLEN, PORTFOLIO MANAGER, PLATO GLOBAL ALPHA FUND, SYDNEY:
"Markets absolutely crave certainty, if we'd had a long contested result you would have seen price swings to the downside in major markets...Trump victory was also somewhat priced in at the margins"
"I do think Trump 2.0 will be different from Trump 1.0... I don't think Trump was even expecting to win the first time and was less prepared. This time is different, I expect him to push through a lot of fast major legislation within the first 100 days, so hold onto your hats."
ROGIER QUAEDVLIEG, SENIOR U.S. ECONOMIST, ABN AMRO RESEARCH, AMSTERDAM
"Given the inflationary expectations associated with Trump’s economic and fiscal policies, we expect U.S. rates to continue rise across the yield curve. We anticipate that the market will further retrace expectations for Fed rate cuts next year due to increased inflation projections, while also pricing in higher term premiums.
"However, our economic analysis suggests that the full implementation of Trump’s policies – especially the tariffs – will eventually weigh heavily on the US economy."
"Trump’s universal tariffs plan is also expected to have a substantial impact on the already fragile Eurozone economy, while the inflationary effects for Europe will be more limited. This could trigger an even more accelerated rate cutting cycle path from the ECB and will likely lead to a greater divergence between the US and European policy rates."
ANDRZEJ SZCZEPANIAK, EUROPEAN ECONOMIST, NOMURA, LONDON:
"In summary: It's bad news for Europe."
"Trump winning means tariffs which will adversely affect growth in Europe. The European Commission is expected to retaliate like-for-like, which could mean higher inflation in the euro area – or, as manufacturing firms' pricing power is so diminished, as we have been flagging for some time, firms could be forced to absorb these higher costs, which in turn may result in some firms shuttering and unemployment rising, thus weighing more heavily on growth."
KEN PENG, HEAD OF ASIA INVESTMENT STRATEGY, CITI WEALTH, HONG KONG
"A lot of this is based on investors' view that Trump would cut taxes or at least keep tax rates low. Now that it's likely to be looking like a red sweep - additional cuts are possible.
"Deregulation is another major positive for the economy and markets, particularly for the financial, energy and tech sectors. The negatives are tariffs. That's going to be negative for global growth, you know, particularly in China, Asia (and)Europe... you see inflation expectations rise.
"I think the market is currently still just enjoying the positive aspects of a red sweep, but I think as time passes, you are likely to see the risks ... get priced in."
NAKA MATSUZAWA, CHIEF MACRO STRATEGIST, NOMURA, TOKYO:
"I think the market was not yet ready for a 'red sweep'... if the 'red sweep' materialises, 10-year yields for U.S. Treasuries could go up to as high as 4.50% and above. Dollar/yen could go over 155. They're kind of half pricing in that level right now.
"If Trump can pass tax and spending bills first, then he doesn't have to rush for the hardline policies against China, which come rather later. If Congress is controlled by Republicans Trump can prioritise economic stimulus measures."
MATTHEW RYAN, HEAD OF MARKET STRATEGY, EBURY, LONDON:
"Not only are markets positioning themselves for a comfortable Trump victory in the electoral college, but the prospect of a Republican-controlled Congress, which is key in determining the ability of the incoming president to force policy changes through the U.S. government."
RONG REN GOH, PORTFOLIO MANAGER, EASTSPRING INVESTMENTS, SINGAPORE:
"With Trump, market volatility is likely to pick up, so trading-wise, it does open up opportunities. The volatility comes from uncertainty surrounding how he intends to follow through on some of his campaign promises.
"Right now the markets are focusing narrowly on the prospect of tariffs, because it is the easiest lever to pull directly under a presidential executive order, but we've seen between 2016 and 2020 other levers that can be pulled to contain China.
"From this perspective, I think a foreign investor is likely to position more defensively towards China-focused risk."
WONG KOK HOONG, HEAD OF EQUITY SALES TRADING, MAYBANK, SINGAPORE
"Carnage in HK/China hasn't really materialised because traders and investors are still awaiting any possible (stimulus) announcements.
"As for the next four years in general, for a start we may need to download Truth Social app."
GARY NG, SENIOR ECONOMIST FOR NATIXIS, HONG KONG:
"As Trump's policies in trade tariffs and tax cuts may lead to higher inflationary pressure and a wider fiscal deficit, the Fed may be less dovish than before.
"Therefore, the yuan can face higher pressure."
BEN EMONS, FOUNDER OF FEDWATCH ADVISORS, WASHINGTON:
"Markets are growing confident that the election result will be called and that a 'red sweep' of Congress is possible.
"U.S. Treasury yields are rising sharply in anticipation that a Republican Congress will pass sweeping tax reform and tax cuts to create conditions for a favorable investment climate in the United States.
"With uncertainty seen as negligible, there is a relief rally in liquidity-sensitive assets like crypto and economy-sensitive assets like small caps."
HOMIN LEE, SENIOR MACRO STRATEGIST, LOMBARD ODIER, SINGAPORE:
"If Trump wins, we have to accept a period of volatility for sure, because it's going to prove quite disruptive, especially for trade policy and immigration policy, potentially even fiscal policy, if Republicans end up sweeping both chambers of Congress as well."
MATT ORTON, CHIEF MARKET STRATEGIST, RAYMOND JAMES INVESTMENT MANAGEMENT, ST. PETERSBURG, FL.:
"I expected yields to move higher, but I am a little bit surprised just to the extent.
"I start to worry when yields cross the 4.50% mark. If we don't reverse that upward trend, I would be more reticent to add too much more risk until we hear from the Fed or get a little bit more guidance with respect to where terminal rates might lie.
"Yields are rising and it's more the association of increased fiscal spending, significantly higher deficits under a Trump versus a Harris administration."
Compiled by the Global Finance & Markets Breaking News team; Editing by Raju Gopalakrishnan, Clarence Fernandez and Catherine Evans
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