- US stocks surged while the dollar rallied and bonds plummeted, with bonds and the dollar posting the largest intraday moves since the COVID-era in response to Trump's victory in the US Presidential Election as Trump proposals of tax cuts supported stocks while the inflationary impacts of tariffs and increased spending (and increased issuance) weighed on T-notes and boosted the buck.
- USD saw its largest move since March 2020 on Wednesday as Donald Trump won the 2024 US Presidency and Republicans also took control of the Senate, while the House remains up for grabs but is also seen as likely to remain a Republican majority with participants viewing Trump's policies of tariffs, tax cuts, less regulation and spending as supportive of an inflationary theme. This propelled the DXY to above the 105.00 level with the attention now turning to the looming FOMC policy decision.
- Looking ahead, highlights include Japanese Labour Cash Earnings, Australian Trade Data, Philippines GDP, Chinese Trade Data, Supply from Japan.
More Newsquawk in 2 steps:
1. Subscribe to the free premarket movers reports
2. Trial Newsquawk’s premium real-time audio news squawk box for 7 days
LOOKING AHEAD
- Highlights include Japanese Labour Cash Earnings, Australian Trade Data, Philippines GDP, Chinese Trade Data, Supply from Japan.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks surged while the Dollar rallied and bonds plummeted, with bonds and the dollar posting the largest intraday moves since the COVID-era in response to Trump's victory in the US Presidential Election as Trump proposals of tax cuts supported stocks while the inflationary impacts of tariffs and increased spending (and increased issuance) weighed on T-notes and boosted the buck.
- SPX +2.53% at 5,929, NDX +2.74% at 20,781, DJIA +3.57% at 43,730, RUT +5.84% at 2,393.
- Click here for a detailed summary.
NOTABLE HEADLINES
- US incoming President Trump said the US is going to pay down debt and reduce taxes and he will create jobs, while he added China does not have what they have and he wants to have a strong and powerful military.
- US VP Harris called Trump to concede the election, according to the Washington Post.
- US President Biden spoke with Trump and is committed to a smooth transition, while he invited Trump to meet with him in the White House.
- Decision Desk's US House tracker has increased to a 94.7% chance of Republicans winning the US House which would result in a Trump + Republican Congress scenario and it is projecting a 223 vs 212 final House result (218 required for control) in favour of Republicans.
FX
- USD saw its largest move since March 2020 on Wednesday as Donald Trump won the 2024 US Presidency and Republicans also took control of the Senate, while the House remains up for grabs but is also seen as likely to remain a Republican majority with participants viewing Trump's policies of tariffs, tax cuts, less regulation and spending as supportive of an inflationary theme. This propelled the DXY to above the 105.00 level with the attention now turning to the looming FOMC policy decision.
- EUR was heavily pressured owing to the dollar strength and amid concerns related to tariffs, defence and Ukraine in a second Trump presidency, while the single currency was also not helped by political turbulence in Germany after Chancellor Scholz dismissed Finance Minister Lindner over budget disputes and will call for a confidence vote on January 15th which could allow elections by the end of March.
- GBP retreated to the sub-1.2900 territory as all major currencies took a substantial hit against the greenback, while participants also look ahead to the BoE rate decision.
- JPY underperformed with USD/JPY at the 154.00 handle amid the surge in US yields amid the Trump trade and incoming US inflationary policies.
FIXED INCOME
- T-notes sold off heavily across the curve in response to the incoming Trump presidency, Republican Senate and likely Republican House, while a strong 30yr auction provided some brief support.
COMMODITIES
- Oil prices ultimately settled in the red in choppy trade as traders digested implications for crude prices in a soon-to-be Trump presidency, while the latest EIA inventory data showed a slightly larger-than-expected build and some output in the US Gulf of Mexico was shut in due to hurricane Rafael.
- US EIA Weekly Crude Stocks 2.149M vs. Exp. 1.8M (Prev. -0.515M).
- BSEE stated that 17.4% of oil production and 7% of nat gas production in the US Gulf of Mexico is shut in due to hurricane Rafael.
- Russian Deputy PM Novak said Russia reached oil output of 9mln bpd as expected and will continue to stick to its pledges, while he added that refining margins could be lower this year or stable.
- China will step up efforts to support domestic exploration of lithium, cobalt and nickel resources and bolster national resource security under the plan.
GEOPOLITICAL
MIDDLE EAST
- Israeli official said the US transition period may provide Israel with an opportunity to strike the Iranian nuclear programme, according to Bloomberg.
- Iran's Revolutionary Guards deputy commander said Tehran does not rule out a US-Israel pre-emptive strike to prevent Iranian retaliation against Israel, while he added that Iran and the resistance front are ready for confrontation, according to ISNA.
- Israeli Army Chief of Staff announced the country's forces should prepare for the expansion of ground operations against Hezbollah in Lebanon, according to Iran International.
- Lebanon’s Foreign Minister said they are ready to strengthen the army's presence south of the Litani River, deploy additional forces and extend state control, according to Al Jazeera.
- Hezbollah's chief said there is only one thing that will end this war which is the battlefield and he is not expecting the war to end through any political action, while he added that when Israel stops its aggression, there will be a road to indirect negotiations through the Lebanese state.
- Hezbollah said it targeted a military base south of Israel's Tel Aviv "for the first time" with a swarm of drones, according to a statement.
- Iraqi security body said recent reports that Iraqi territory may be used to launch attacks or retaliations are "false pretexts" aimed at justifying attacks on the country, according to a military spokesman.
- IAEA chief Grossi may visit Tehran in the next few days.
OTHER
- US President Biden’s administration plans to rush the last of over USD 6bln remaining in Ukraine security assistance out of the door by inauguration day, according to Politico.
- Russia's Kremlin said the US remains in a hostile state to Russia, while the Russian Foreign Ministry said Russia will remain focused on achieving its goals in Ukraine.
- Panama's maritime authority said they will cancel flags on four LNG vessels sanctioned by the US over links with Russia's Novatek.
- UK Defence Minister said the UK is exploring options to re-establish a nuclear fuel cycle for reactor fuel and defence purposes.
ASIA-PAC
NOTABLE HEADLINES
- Chinese President Xi urged Chinese officials again to meet annual economic target, according to Bloomberg.
- China's Foreign Ministry said China will continue to work with the US on the basis of 'mutual respect' and that China's policy towards the US is consistent.
- RBNZ Deputy Governor Hawkesby said domestic economic challenges remain and unemployment is expected to rise further, while he added that Trump's economic policies are expected to be "very much manageable" for global central banks.
EU/UK
NOTABLE HEADLINES
- UK Finance Ministry's permanent secretary Bowler said gilt auctions have been strong and the market is orderly.
- German Chancellor Scholz reportedly dismissed Finance Minister Lindner over budget disputes, according to Reuters citing sources. It was also reported that Scholz announced he will call for a confidence vote on January 15th which could allow elections by the end of March and he will talk to opposition leader Merz, while he noted the economy cannot wait until after the elections.
- ECB President Lagarde’s text release on supervisory issues stated that "Reducing the ring-fencing of capital and liquidity along national lines would allow funds to flow freely within banking groups and facilitate lending across borders".
- ECB's de Guindos said inflation is going in the right direction but noted growth is weak without a recovery in consumption and that services inflation is currently the main problem. De Guindos said the ECB is to take a meeting-by-meeting and data-dependent approach, as well as noted that the ECB is becoming more confident about meeting its inflation mandate and the policy trajectory is more important than the size of cuts. ECB's de Guindos also said the disinflationary process is well on track, while he added that tariffs and trade barriers are going to be detrimental to the global economy.
- ECB's Villeroy said a Trump administration will likely lead to a higher deficit and rate cuts will continue.
DATA RECAP
- UK S&P Global Construction PMI (Oct) 54.3 vs. Exp. 55.5 (Prev. 57.2)
- EU HCOB Services Final PMI (Oct) 51.6 vs. Exp. 51.2 (Prev. 51.2)
- EU HCOB Composite Final PMI (Oct) 50.0 vs. Exp. 49.7 (Prev. 49.7)
- EU Producer Prices MM (Sep) -0.6% vs. Exp. -0.6% (Prev. 0.6%)
- EU Producer Prices YY (Sep) -3.4% vs. Exp. -3.5% (Prev. -2.3%)
