Trump won in 2016, he also won in 2020 (but it was stolen from him thanks to 20 million "vapor" votes which magically failed to make a re-appearance in 2024), and he just won again in a landslide, not just the electoral but the popular vote as well... and boy are markets rocking!
Donald Trump’s victory in the US presidential election has unleashed a shockwave in global markets as traders prepared for unprecedented policy and economic changes under the new administration. Trump’s political comeback sparked a surge in risk assets, sending 30-year Treasury yields and the dollar to their biggest gains since 2020...
... Dow futures soared more than 1,300 points...
.... S&P 500 futures climbed 2.3%...
... and Bitcoin spiked to a record.
Tesla co-founded by Trump’s biggest backer Elon Musk, surged 15% in premarket trading.
From London to Tokyo, investors around the globe grappled with the far-reaching effects of a Trump presidency, which according to Bloomberg "is expected to bring steep tariffs on imported products, worsen trade tensions with China and increase pressure on Europe to ramp up defense spending." Apparently it is also sending risk assets soaring. The Mexican peso - viewed as the anti-Trump trade due to his threats to flood Mexico's economy with tariffs - fell the most in three months and the euro led losses among Group-of-10 currencies.
“We’ve been talking about this Trump trade for a while. The fairly aggressive market reaction shows that investors didn’t know what to put on, and now they know,” Marvin Loh, senior macro strategist at State Street Global Markets, told Bloomberg TV. “A lot of us will be asking is which ones potentially have either a lot more to move or really does not yet reflect the type of administration.”
For those who missed it, here is a recap of what happened in the year's biggest event:
This is how all major asset classes reacted:
Equities also reflected expectations that Trump would loosen financial regulation, embrace crypto and support fossil fuel producers. JPMorgan and Bank of America shares advanced in early trading. Tilray, a cannabis company, sank 10% after Florida voters rejected a ballot measure to legalize recreational marijuana. Elsewhere in the premarket:
Some other notable premarket movers:
Goldman’s trading desk said a Republican sweep may push the S&P 500 up by 3%, while moves would be half as much in the event of a divided government. A Morgan Stanley note said risk-taking appetite may dip in the event of a Republican sweep as fiscal concerns fuel yields, but if bond markets take it in their stride the likes of growth-sensitive cyclical stocks would rise.
We will have much more to say on the kneejerk reactions, but here are some more hot takes from Wall Street:
In Europe, stock gains have faded slightly as investors contemplate the risk of increased potential trade protectionism by a Trump administration. The Stoxx 600 is up 1.2% with health care and travel shares leading gains, while utilities and automobile sectors were the biggest laggards. Here are the biggest movers Wednesday:
In FX, the Bloomberg Dollar Spot Index is up 1.4%, with the greenback logging its largest gain against the euro in G-10 space. The Mexican peso is one of the biggest losers overall with a 2.6% drop.
In rates, treasuries lost out, with US 10-year yields jumping 17 bps to 4.44% and the 2s10s curve steepening. Traders also pared Fed interest-rate cut bets while amping up their bets of European rate reductions, pricing in a faster pace of easing by the ECB and BOE to the benefit of bunds and gilts.
In commodities, oil prices decline, with WTI falling 1.3% to $71 a barrel. Spot gold drops $24 to around $2,720/oz. Bitcoin soared 7% to a record high.
To the day ahead now, and data releases include German factory orders for September, and the final services and composite PMIs for October in the Euro Area. From central banks, we’ll hear from ECB President Lagarde, Vice President de Guindos, and the ECB’s Escriva, Vujcic and Villeroy.
Market Snapshot
Top Overnight News
A more detailed look at global markets courtesy of Newsquawk
APAC stocks mostly followed suit to the risk on performance on Wall St as participants digested the US Presidential Election results where Trump is leading so far, and betting markets boosted their pricing of the former President returning to the White House. ASX 200 was lifted with outperformance in tech, consumer discretionary and financials leading the gains seen in all sectors. Nikkei 225 surged above the 39,000 level with the momentum propelled by a weaker currency. Hang Seng and Shanghai Comp lagged with the Hong Kong benchmark the worst hit as tech was pressured amid the increased tariff threat for Chinese companies, while the mainland traded indecisively as prospects of looming fiscal stimulus offset the tariff threat.
Top Asian News
European bourses, Stoxx 600 (+1.7%) opened on a strong footing and continue to edge higher, with Presidential Candidate Trump poised to win the election. Indices have dipped off best levels in recent trade. Note, European futures were lower by as much as 1% pre-open, before picking up given the US enthusiasm. European sectors hold a strong positive bias, with only Utilities and Autos trading in the red; latter sensitive to potential tarriff updates. Healthcare tops the pack, buoyed by gains in Novo Nordisk, post-earnings. US Equity Futures (ES 2.1%, NQ +1.7%, RTY +5.5%) are entirely in the green, with the “Trump Trade” very much in full swing, with the Republican nominee on the cusp of a historic victory. As a result, the economy-linked RTY is the clear outperformer today. US pre-market movers include; Tesla (+12.9%), Trump Media (+38.5%), Exxon (+2.9%), Morgan Stanley (+5.9%), JD.Com (-4.1%)
Top European News
FX
Fixed Income
Commodities
Geopolitics
US Event Calendar
DB's Jim Reid concludes the overnight wrap
It's been a big night with Mr Trump looking set to become just the second President to serve non-consecutive terms in history, and the first for well over a hundred years, after Grover Cleveland in the late-19th century. So a likely remarkable political comeback after an approval rating in the low 30 percent range when he left office in January 2021.
As we type, the New York Times needle, which is a well respected forecasting gauge has Trump with a 92% chance of victory. Polymarket.com is pricing it at 97%. Of the battleground states, only North Carolina and Georgia have so far been called by the media in favour of Trump with the other 5 with a probability of 64-80% going to Trump. The potential tipping point state of Pennsylvania has a 79% probability.
In terms of Congress, the House will be the key to whether there is a "red sweep". Here we may not have more clarity until later in the day or even later in the week. The seats have all gone as expected so far which suggests it could be very close. The perception is that the popular vote may be the best proxy for this and here the NYT needle's estimate suggests Trump is likely to win by 1pp, albeit with a 3pp margin for error on either side. If Trump does win the popular vote it will be the first time in his three election runs. Polymarket has swung a lot in the last hour but the House going Republican is at 64% as I finish typing at 5:45 am.
So it seems the biggest market debate will now be between a Trump red sweep and a Trump divided government where the House stays with the Democrats.
As a reminder, control of the House will be important for policy expectations and markets. While our strategists have seen a Trump victory as positive for the dollar (see here), not least given significant presidential authority on trade policy, congressional control will be important in many areas, especially fiscal policy. Our economists have previously viewed a Republican sweep as having the most upside in terms of fiscal easing (see here), with potential corresponding upside for the Fed terminal rate. Our strategists also saw a red sweep scenario as having the clearest upside for Treasury yields.
The market reaction so far is probably going as you would expect given the results. The 10yr Treasury yield is up +12bps to 4.39%, the dollar index is +1.26% higher, with the euro falling -1.27% against the greenback. That comes after the dollar index fell -0.45% yesterday, starting the week with its worst two-day run (-0.82%) since August. Other Trump trades benefiting include Bitcoin rising +7.26%. S&P (+1.02%) and Nasdaq +(0.84%) futures are both up as I type. Red sweep trades are off their highs with the direction of the House being in a little doubt. One thing to consider is that if there is a split Congress, you could argue that tariff policy becomes the priority assuming Trump wins, as he won't be able to get his tax policy through without negotiations.
European equity futures are -0.59% lower and European bond futures are a lot flatter than US bonds as markets wake up to the implications of Trump's likely tariff policies. If the results continue to move in this direction, then the prospects of the ECB being forced to move faster will increase. Nothing happens in isolation though, and there is risk of an early German election given events over the last few days which our economists have discussed here. This could have some implications for fiscal policy. Elsewhere China's NPC standing committee may announce more clarity on fiscal policy when the meeting ends on Friday. It's possible they have been waiting for the results of the US election to calibrate things. So lots of moving parts.
In Asia, the Nikkei is outperforming with a gain of +1.87%, and the S&P/ASX 200 is also up by +0.85%. Conversely, the Hang Seng Tech Index is down by -3.03%, followed by the Hang Seng, which has dropped -2.61% and the KOSPI (-0.93%). Mainland Chinese stocks are fairly flat.
Yesterday might feel like ancient history now, but before we knew the direction of likely election result, markets saw a strong risk-on move thanks to an upside surprise in the ISM services index for October. It rose to its highest level since July 2022, coming in at 56.0 (vs. 53.8 expected), and the details were also very positive. For instance, the employment component was back at an expansionary 53.0, marking its highest level since August 2023. And even though there was a modest downtick in new orders to 57.4, it was still the second-strongest print since February 2023.
That release continued the run of positive data surprises from the US recently, and it led investors to pare back their expectations for rate cuts over the months ahead. The rate priced in for the Fed’s December 2025 meeting was up +3.7bps yesterday to 3.66%, taking pricing back to roughly where it was before the summer market turmoil. However, the rise in rates proved fleeting on the long-end of the curve. 10yr Treasury yields ended the day -1.3bps lower at 4.27%, despite trading +8bps intra-day early on, with the reversal helped by a decent 10yr auction. Obviously all this has changed this morning.
Speaking of bonds selling off, yesterday saw UK gilts continue to underperform amidst weak demand at a 10yr auction. That follows last week’s announcement of noticeably higher borrowing in the budget, and it meant the spread of 10yr gilt yields over bunds widened by another +4.0bps to 211bps. That’s the biggest gap since Liz Truss was still PM back in October 2022, having risen by nearly 50bps since mid-September. In absolute terms, the 10yr gilt yield was up +7.2bps to a one-year high of 4.53%. Elsewhere in Europe, the selloff also saw yields on 10yr bunds (+3.3bps) hit a three-month high of 2.42%.
US equities showed no signs of pre-election jitters, as the S&P 500 (+1.23%) posted its strongest gain since September to close less than 1.5pp from its record high. That was supported by the upbeat data, and the Atlanta Fed’s GDPNow estimate for Q4 stood at 2.38% after yesterday’s releases. So there’s little sign that the strong growth of late is easing, which has continued to boost risk assets. The megacap tech stocks led the way, with the Magnificent 7 up +1.76%, with Nvidia (+2.84%) overtaking Apple (+0.64%) as the world’s most valuable company. The tech advance was supported by software platform provider Palantir Technologies (+23.47%) after it reported strong AI-related demand. But the gains were broad-based with all 24 industry groups within the S&P 500 higher on the day and the small-cap Russell 2000 (+1.88%) outperforming. European markets were fairly subdued, and the STOXX 600 was only up +0.06%.
To the day ahead now, and data releases include German factory orders for September, and the final services and composite PMIs for October in the Euro Area. From central banks, we’ll hear from ECB President Lagarde, Vice President de Guindos, and the ECB’s Escriva, Vujcic and Villeroy.