US equity futures extended their post-election gains, as S&P futures traded near session high with both Tech and small caps outperforming as the dollar eased and yields were flat, as traders continued to map out Trump’s return to the White House and what it holds for the Fed’s interest-rate path. As of 8:00am ET, S&P 500 futs traded 0.2% higher after surging in the previous session on bets that the newly elected President will boost corporates through pro-growth policies; Nasdaq futures rose 0.4% after hitting a new all time high on Wednesday; Mag7 names were mixed premarket with semis bid despite NVDA dipping -21bps. An index of the dollar retreated 0.3% following its best day since Sept 2022. Moves in US Treasury yields were muted after Wednesday’s seismic selloff; bond yields are 1-2bps lower as the curve steepens. The commodity complex is mixed with Ags higher, Energy lower, and Base metals outperforming Precious. Today’s macro data focus is on the Fed’s decision (2pm ET) and the BOE (7am ET); both CBs are expected to cut by 25bps.
In premarket trading, Lyft soared 22% after the ride-hailing company topped fourth-quarter forecast, with analysts positive about the company’s profitability path. Tinder parent Match Group tumbled 13% after the dating-app company’s fourth-quarter revenue forecast missed estimates. SolarEdge shares slumped 16% after the renewable-energy-equipment provider took a $1-billion writedown and issued underwhelming guidance for the fourth quarter. Here are some other premarket movers:
The furious post-election rally eased on Thursday after grappling with the far-reaching consequences of a Trump presidency. His win has forced investors to come to terms with economic policies that could lead to fewer Fed rate cuts, along with a possible Republican sweep of Congress that could help fuel fiscal expansion.“What we saw yesterday was the playbook of the Trump trade in action but it’s soon going to evolve,” said Arnaud Girod, head of economics and cross-asset strategy at Kepler Cheuvreux in Paris. “US yields can’t continue to go up with US equities on the rise, my conviction is that yields will calm down.”Ahead of the Fed’s rate cut at 2pm (full preview here), the Bank of England lowered borrowing costs earlier on Thursday by 25 basis points to 4.75%. Governor Andrew Bailey said that rates are likely to fall “gradually from here” and that last week’s UK budget will lift inflation by just under half a percentage point at its peak.In Europe, stock also gained for a second day, with the Stoxx 600 rising 0.6% led by gains in basic resources after Chinese stocks closed near a one-month high as traders digested the possibility of fresh elections in Germany and whether it could help to revive growth in Europe’s biggest economy. Here are the biggest movers Thursday:
Earlier in the session, Asian stocks rose, supported by a rally in China, as expectations grow that Beijing will unveil more stimulus at this week’s key policy meeting to counter potential risks from Trump’s second presidency. The MSCI Asia Pacific Index rose as much as 1%, on track to hit the highest level in more than two weeks. Toyota, TSMC and DBS were among the biggest contributors. Most major markets in the region advanced Thursday, led by mainland China, Hong Kong and Singapore. Japan’s Topix also rose, while Philippine and Indonesian stocks extended losses to a second day. Chinese shares rebounded strongly from Wednesday’s losses as robust exports data lifted sentiment. Traders are monitoring the Standing Committee meeting of the National People’s Congress, which concludes Friday, for possibly more measures to boost the economy and markets.“The market is speculating the policymaker would announce a relatively large scale of fiscal package to stimulate domestic demand after the NPC meeting, in order to offset the potential tariff hike risk from Trump,” said Jason Chan, senior investment strategist of Bank of East Asia. “So sectors like consumer, property, Internet and SOEs are the major contributors.”In FX, the Bloomberg Dollar Spot Index falls 0.3%. The Norwegian krone is the best performer among the G-10 currencies, rising 1.1% against the greenback after the Norges Bank repeated no imminent plans for easing. The Swedish krona adds 0.5% after the Riksbank cut interest rates by 50 bps. The pound surged 0.6% after the hawkish Bank of England rate 25bps cut with traders seeing no more rate cuts until next year.In rates, treasuries traded higher, with US 10-year yields falling less than a basis point to 4.43%. German bonds underperform their US peers, with the long end under pressure as traders brace for the possibility of more debt sales after the nation’s ruling coalition collapsed. German 10-year yields rise 8 bps and are above the equivalent swap rate for the first time as traders braced for the possibility of an administration that could be more tolerant of increasing debt.In commodities, oil prices decline, with WTI falling 0.8% to $71.10 a barrel. Spot gold rises $8 to $2,667/oz.Looking at the US economic data calendar, the main highlight will be the Federal Reserve’s latest policy decision at 2pm ET, along with Chair Powell’s subsequent press conference. The slate also includes 3Q productivity and unit labor costs and weekly jobless claims (8:30am), September wholesale inventories (10am) and consumer credit (3pm).Market Snapshot
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A more detailed look at global markets courtesy of NewsquawkAPAC stocks were somewhat mixed albeit with a mostly positive bias as the dust settled from the US election and the Trump trade began to wane after reverberating across global markets with participants bracing for higher US tariffs, while participants also digested Chinese trade data as the attention turned to the incoming central bank rate decisions including from the FOMC. ASX 200 was indecisive but eventually finished positive as strength in energy, tech, industrials and financials gradually picked up the slack from weakness in real estate and defensives, while weak Australian trade data capped the upside. Nikkei 225 initially surged on the back of a weaker currency but failed to sustain the momentum and gave back its spoils. Hang Seng and Shanghai Comp shrugged off the threat of incoming blanket tariffs from the next US administration as participants continued to await a potential fiscal stimulus announcement and as the latest Chinese trade data was mostly better-than-expected with double-digit export growth. Furthermore, the PBoC held a meeting with international financial institutions and affirmed to continue its accommodative monetary policy, while China told banks to cut interbank deposit rates to boost growth.Top Asian news
European bourses, Stoxx 600 (+0.6%) began the session on a modestly firmer footing and continued to edge higher as the morning progressed. Today’s EZ-specific docket has been relatively light, but focus ahead will lie on policy announcements from the BoE and the Fed thereafter. Region awaiting updates on China’s stimulus and also sensitive to ongoing political uncertainty in Germany. European sectors hold a strong positive bias. Basic Resources is by far the clear outperformer, lifted by strength in underlying metals prices after strong Chinese price action overnight. Telecoms is found at the foot of the pile, dragged down by losses in Telefonica (-1.5%) and BT (-5.2%), with the latter also lowering its FY25 guidance.
US Equity Futures (ES +0.2%, NQ +0.2%, RTY +0.3%) are modestly firmer across the board, taking a breather following the significant gains seen in the prior session, where the S&P500 soared to record highs after Trump returned to Presidency.Top European news
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- 3Q Unit Labor Costs, est. 1.0%, prior 0.4%
- Oct. Continuing Claims, est. 1.87m, prior 1.86m10:00: Sept. Wholesale Trade Sales MoM, est. 0.1%, prior -0.1%
DB’s Jim Reid concludes the overnight wrapMorning from Oslo where I gave a speech to clients at a large annual dinner last night. I’m not sure how I stayed up as I thought I’d left the days of being awake all night behind me when the twins arrived 7 years ago. I spent most of yesterday walking around like a zombie after being awake most of election night. Hopefully that won’t happen again unless I have more kids (would be a biological miracle for my wife and I collectively aged more than 100) or until November 2028!As if the US election was not enough, yesterday evening brought major political news out of Germany as Chancellor Scholz called for a confidence vote on January 15 with snap elections likely to follow in March. Our German economists had noted earlier in the day that the US election outcome could add to the tensions in Germany’s three-way coalition and lead to a political circuit-breaker. That materialised last night with SPD’s Scholz dismissing FDP’s Lindner as Finance Minister. The current coalition has been at odds over the budget, and Lindner said he had refused the Chancellor’s request to suspend Germany’s debt brake, while Scholz called for “more financial wiggle room”. With an early election now on the cards, a key question is whether this could lead to a step change in Germany’s fiscal policy. As things stand, Politico’s polling average shows the centre-right CDU in the lead at 32%, followed by the populist AFD on 18% and centre-left SPD on 16%. The greens are at 10%, while the liberal FDP is at 4% (shy of the 5% parliament entry threshold).Looking now at the market reaction to the US election result. Let’s start with some highlights. The S&P 500 (+2.53%) hit its 48th record high this year posting the best post-election day in its history. The 10yr Treasury yield rose +15.9bps, while the 30yr yield (+17.1bps) posted its biggest jump since March 2020 during the pandemic turmoil. In the meantime, the dollar had its strongest day against the euro since 2016 (+1.89%), whilst Bitcoin (+6.50%) closed at an all-time high of $74,507. So it was a historic day that we’ll no doubt benchmark against for some time when it comes to market movements.In terms of the politics, we knew in yesterday’s EMR that a Trump victory was incredibly likely, but we got formal confirmation of that by the Associated Press at 10:34 London time, when his victory in the battleground state of Wisconsin was confirmed. We’ll have to wait a bit for the complete final results, but if Trump maintains his lead in the states he’s ahead in, that would put him on 312 electoral college votes, with Kamala Harris on 226. So Trump would slightly beat his 2016 electoral college tally thanks to the addition of Nevada (which he didn’t win on either previous attempt), and this also looks like the first of his three runs where he’s won the nationwide popular vote.From a market point of view, the other significant development is that it now appears highly likely there’ll be a Republican sweep outcome. The Senate is already confirmed for the Republicans, but the House of Representatives now looks very likely to go their way too, with Polymarket currently placing the chance of a Republican sweep at 94% now.Of course, the reaction was particularly evident among US Treasuries, which witnessed a sharp selloff right across the curve. That’s because the view is that higher tariffs mean that inflationary pressures will rise, and an extension of the Trump tax cuts under a Republican sweep mean the deficit will go up further in the years ahead. Plus the Fed are less likely to cut rates in this scenario. In fact, higher inflation expectations were clear from how inflation swaps reacted, with the 2yr inflation swap surging by +18.6bps yesterday to 2.62%. And the rate priced in by the Fed’s December 2025 meeting was up +12.0bps on the day to 3.78%.All those trends led to a significant rise in Treasury yields, sending the 2yr yield (+8.4bps) to a 3-month high of 4.26%, whilst the 10yr yield (+16.0bps) hit a 4-month high of 4.43%. Real yields also rose, with the 10yr real yield (+6.4bps) hitting its own 4-month high of 2.04%. Moreover, as both nominal and real yields moved sharply higher, the dollar index surged by +1.61%, whilst precious metals took a significant hit, with sharp losses for gold (-2.87%) and silver (-4.76%).Meanwhile for US equities, it was a very strong day, in line in with our strategists’ view that they were likely to rally after the election, irrespective of who won. That helped push the S&P 500 (+2.53%) to an all-time high. The small-cap Russell 2000 (+5.84%) posted its strongest performance since November 2022. In addition, banks outperformed given expectations that Trump would bring deregulation, and the KBW Bank Index (+10.69%) had its best day since November 2020, back when the Pfizer vaccine announcement led global markets to surge. The VIX index of volatility also plummeted, falling -4.22pts on the day to 16.27pts.But even as many sectors were rallying, it wasn’t all plain sailing. Rates sensitive sectors including consumer staples (-1.57%) and utilities (-0.94%) underperformed within the S&P 500. One significant loser were solar energy firms given the view that Republicans would be less favourable than Democrats towards renewables, and the MAC Global Solar Energy Index (-10.07%) posted its biggest loss since the pandemic turmoil of March 2020. European automakers also slumped given the tariff risk, and the STOXX 600 Automobiles & Parts Index was down -2.29%. That echoed a broader decline across European equities which saw the STOXX 600 (-0.54%) lose ground after the initial rally was tempered by the obvious prospect of tariffs and US exceptionalism over a US tide lifting all boats.Whilst the US election has been dominating attention, the focus will turn back to the Federal Reserve today, who are announcing their latest policy decision. At their last meeting, they opened a cycle of rate cuts with a larger 50bp move, but for today it’s widely expected that they’ll dial that back to 25bps. That’s the baseline from our US economists as well, who expect the Fed to continue the process of “recalibrating” monetary policy. However, they think Chair Powell is unlikely to provide forward guidance about the policy path ahead. Future reductions are data dependent and they see heightened risks that the Fed skips a rate cut at the December meeting.Alongside the Fed, the Bank of England will also announce their latest policy decision today, which is their first since the UK government unveiled their Budget last week. As with the Fed, our UK economist expects a 25bp rate cut, which would take Bank Rate down to 4.75%. But in the meantime, UK gilts have continued to sell off, with the spread of 10yr gilt yields over bunds widening by +5.4bps yesterday to 215bps. That’s its widest closing level since September 2022, in the week immediately after the “mini-budget” that triggered market turmoil when Liz Truss was Prime Minister. And in absolute terms, the 10yr gilt yield ticked up another +3.3bps to a one-year high of 4.56%. Bunds (-2.1bps) outperformed, but a more cautious risk tone in Europe saw yields on 10yr OATs (+1.7bps) and BTPs (+6.1bps) move higher.Asian equity markets are digesting the implications of the Trump win with the Nikkei reversing its initial gains, now trading -0.45% lower. The Hang Seng initially dropped but has since rebounded, climbing +1.16%. The CSI (up +0.70%) and the Shanghai Composite (up +0.88%) are also higher, driven by China’s October export figures significantly surpassing expectations. We also wait news of the latest fiscal stimulus news possibly coming tomorrow. Elsewhere, the KOSPI is up +0.38%, while the S&P/ASX 200 is relatively flat. US equity futures are up around a tenth of a percent and with Treasuries fairly flat.Focusing back on China, exports grew by +12.7% year-on-year in October, far exceeding the expected +5.0% and marking the fastest growth in over two years, compared to a +2.4% increase the previous month. It’s possible some of it may have been a rebound to typhoon distribution in September. The report also indicated that imports fell by -2.3% year-on-year in October, against an expected -2.0% decline and a +0.3% increase in September. Consequently, the trade surplus unexpectedly expanded to $95.7 billion in October, up from $81.7 billion in September.Finally, there wasn’t too much data yesterday, although the final services and composite PMIs for October in the Euro Area saw some upgrades from the earlier flash prints. In particular, the Euro Area composite PMI came in at 50.0 (vs. flash 49.7), and the Euro Area services PMI came in at 51.6 (vs. flash 51.2).To the day ahead now, and the main highlight will be the Federal Reserve’s latest policy decision, along with Chair Powell’s subsequent press conference. There’s also a policy decision from the Bank of England, and a press conference from Governor Bailey. Otherwise, ECB speakers include Stournaras, Schnabel, Elderson, Escriva, Knot and Lane. Data releases include German industrial production and Euro Area retail sales for September, the German construction PMI for October, and the US weekly initial jobless claims.More By This Author:How American Households Have Changed Over The Last 65 YearsGerman Government Collapses As Mass Strikes Grind Economy To A HaltOPEC+ Delays Production Hike (Again)
