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A word of caution from Deutsche Bank global co-head of currency research George Saravelos:
“Global risk assets are taking their cue from U.S. equities and generally doing well; in turn high-beta FX such as the commodity currencies are outperforming,” he says. “We would be very cautious in extrapolating this price action and historical correlations going forward.”
Why? “The U.S. election outcome in our view is historical in nature; it has the capacity to create a regime shift in markets whereby correlations break down due to highly idiosyncratic and divergent shocks between the U.S. and the rest of the world. This is another way of saying it is entirely possible for one market to go up (U.S.) and another to go down (rest of world) even if this has never happened before in history.”
Saravelos says the market has only priced in a moderate policy response of fiscal easing and tariffs. “To sum up, if the Trump policy platform goes ahead, there is still much more to go in the dollar and broader [fixed income and currencies] market pricing, in our view.”
Treasury yields are soaring following former President Donald Trump’s electoral victory on Tuesday. That’s putting added emphasis on Wednesday’s auction of $25 billion in 30-year bonds, according to one veteran bond trader.
“More of a focus on today’s 30y auction with Trump winning the election. He is generally considered a negative for the long-end and yields have been surging overnight with 30s now at new highs of 4.67,” said Ed Bradford, an independent trader, in a post on X.
Auctions have been mixed lately, with some seeing surprisingly soft demand for newly issued notes and bonds.
Bradford added that Thursday’s post-Fed press conference should be interesting, given the widespread view that policies favored by Trump could put upward pressure on inflation. However, he expects the Fed will ultimately look through any impact on price levels due to tariffs, since it would likely be a one-time adjustment.
But bond traders can take comfort in one potentially positive development: With Trump back in the White House, they will likely be spared another debt-ceiling standoff next year.
Yields on the long bond rose to their highest levels since late May, and recently stood at 4.655%, according to FactSet data. They were up 21 basis points in recent trade.
Gold prices were retreating Wednesday morning from record levels in the wake of the U.S. election, but the selloff likely will be short-lived, according to Peter Cardillo, chief market economist at Spartan Capital Securities.
Gold was down about 1.3% to about $2,715 an ounce in premarket trade, after topping $2,800 a week ago, according to FactSet. I has been pressured lower by a spike in Treasury yields, a surge in bitcoin and strong demand for the U.S. dollar, Cardillo said, in a client note.
“However, we see selling in the precious metals being short-lived as Central Banks are likely to increase buying at lower levels,” he said. Tariffs under Trump could further boost demand for gold in terms of its share of global central-bank reserves.
The greenback has soared on news of former President Donald Trump’s electoral victory, leaving it on track for its best day in more than two years, by one measure.
Big gains for the buck helped push the ICE U.S. Dollar Index, which measures the dollar’s value against a basket of its biggest rivals (although it’s most heavily weighted toward the euro), 1.6% higher at 105.04 in recent trade, according to FactSet data. If it holds, this would be its biggest gain since Sept. 23, 2022.
The ICE index was also trading at its strongest level since early July, meaning the buck has reversed nearly all of its precipitous third-quarter decline.
The dollar rose against all of its major G-10 and emerging-market rivals, although it saw the biggest gains against the euro, which was down 1.9% at $1.07 in recent trade, and the Mexican peso, which was off by more than 3% at 20.74 pesos to the buck. The Japanese yen, which has been a major focus for international markets since the unwind of the yen carry trade was blamed for a punishing but short-lived selloff in global stocks, was also taking a beating, as was the Chinese yuan.
However, the dollar’s powerful overnight rally was already showing signs of fatigue. That’s understandable, considering that many of the details of Trump’s policy proposals, as well as their eventual international impact, have yet to be worked out.
“In view of the election outcome, the USD surged across the board this morning. That said, while the market is familiar with the broad outline of a Trump presidency, a huge amount of uncertainty remains on the size and extent of his policies,” Jane Foley, senior FX strategist at Rabobank, said in a client note shared with MarketWatch.
“An even greater amount of uncertainty pertains to the international impact of Trump’s agenda and then on the possible policy responses of governments and major central banks around the world.”
U.S. government bonds were selling off sharply on Wednesday after former President Donald Trump won the presidential election.
The 10-year yield surged 17 basis points in premarket trade to about 4.46%, briefly climbing as high as 4.47%, according to FactSet. The benchmark rate was poised to reclaim its highs from four months ago, threatening to push up borrowing costs for the U.S. economy.
Treasury bonds have been under pressure since the Federal Reserve cut interest rates in September, on robust U.S. economic data and jitters around Trump’s plans to push through additional tax cuts and tariffs, which could reignite inflation and increase the already large U.S. deficit.
Stock futures and crypto is rallying, but gold is not — in recent trade down about $21 an ounce, or 0.8%.
Gold is still up 32% this year.
“A part of the recent strength in the gold price could have been associated with election uncertainty and the widely held belief that the result would be close and contested. In practice, the definitive election result has eliminated a major source of uncertainty, helping to explain the gold price sell off,” said Daniel Murray, global head of research at EFG Asset Management.
The French national who ran four interrelated accounts on the crypto betting site Polymarket has profited handsomely from his bets on former President Donald Trump.
The user’s combined profit was over $47 million, according to MarketWatch calculations of the accounts.
The accounts — Fredi9999, Theo4, PrincessCaro and Michie — can be viewed in real time.
It’s all-in on the Trump trade in premarket trade.
Trump Media & Technology stock jumped 40%, MicroStrategy (which has a huge bitcoin holding) gained 14% and Elon Musk-run Tesla rose 13%.
The losers are renewable plays: SunRun, First Solar and Enphase Energy are each down by about 9% to 13%.
As strong as the S&P 500 is looking, it has nothing on the small caps.
The E-mini Russell 2000 contract is up 6.2% in recent trade. To put that in perspective, that would be the best single-day gain since May 18, 2020, when the contract rose by 7%.
After a strong European open, U.S. stock futures took another leg higher.
Betting markets are now assuming a more than 90% chance of an across-the-board red wave, though it’s going to take some time to count the votes for the House of Representatives.
That’s sent Dow futures up over 1,100 points as the S&P 500 contract rose by over 2%.