Stocks retain election gains, dollar eases

by Andre Janse van Vuuren and Margaryta Kirakosian

US equity futures maintained their post-Election Day gains and the dollar eased as traders continued to map out Donald Trump’s return to the White House and what it holds for the Federal Reserve’s interest-rate path.

S&P 500 contract futures edged higher after the US benchmark surged in the previous session on bets that the newly elected President will boost corporates through pro-growth policies. An index of the dollar retreated 0.3% following its best day since 2022. Treasury yields eased after a seismic selloff on Wednesday.

Markets are taking a breather Thursday after grappling with the far-reaching effects of a Trump presidency. His win has forced investors to come to terms with economic policies that could lead to fewer rate cuts from the Federal Reserve, 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.”

Later today, Fed Chair Jerome Powell will face a tough test as a second Trump term sparks concerns over inflation. Officials are expected to lower rates by 25 basis points, a move that will come on the heels of the half-point cut in September.

Traders are currently betting on about 100 basis points of Fed cuts by September 2025, compared to 110 basis points on Tuesday.

“What would be interesting is not so much the cut, but communication around December and next year,” James Vokins, portfolio manager at Aviva Investors, said in an interview. For Powell, “it will be a very difficult situation and it will be a very difficult communication to manage, he will have to be careful not to be too firm on any particular direction.”

Read More: Powell Is Back in Trump’s World and About to Feel the Heat

The Bank of England also sets policy on Thursday and is seen lowering borrowing costs by 25 basis points. Governor Andrew Bailey, who speaks after the meeting, will likely be pressed on how the additional spending announced by the new UK government last week impacts the outlook for further easing.

Europe’s benchmark stock index advanced 0.4% as traders digested the possibility of fresh elections in Germany and whether it could help to revive growth in Europe’s biggest economy. The prospect of a stronger dollar under Trump is also offering a silver lining for some of the region’s biggest exporters.

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In Asia, Chinese stocks were among the best performers on optimism Beijing will roll out more stimulus measures and on encouraging export data. The yen strengthened after Japan’s chief currency official Atsushi Mimura said the authorities would take appropriate action against excessive currency moves. 

Bitcoin, boosted by Trump’s embrace of digital assets during his campaign, slipped 1.4% Thursday after rising to a record high the day before. Oil extended losses after a roller-coaster session on Wednesday as traders weighed the likely impact of Trump’s election victory on the crude market.

Corporate Highlights:

• Lyft Inc. soared 22% in premarket trading after the ride-hailing company topped fourth-quarter forecast, with analysts positive about the company’s profitability path.
• SolarEdge Technologies Inc. shares slump as much as 21% in premarket trading after the provider of renewable energy equipment took a $1 billion writedown and issued underwhelming guidance for the fourth quarter.
• Arm Holdings Plc shares fell 6% in premarket trading, with weak royalties weighing on the chip designer’s third-quarter revenue forecast.
• Nissan Motor Co. cut its annual profit outlook and announced plans to eliminate thousands of jobs globally as it looks to counteract deteriorating sales in major markets.
• Activist investor Elliott Investment Management has built up a sizable stake in German utility firm RWE AG, calling on the firm to consider a share buyback.

Key events this week:

• UK BOE rate decision, Thursday
• Fed rate decision, Thursday
• US University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.2% as of 5:29 a.m. New York time
• Nasdaq 100 futures rose 0.3%
• Futures on the Dow Jones Industrial Average rose 0.2%
• The Stoxx Europe 600 rose 0.4%
• The MSCI World Index rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index fell 0.3%
• The euro rose 0.3% to $1.0758
• The British pound rose 0.2% to $1.2910
• The Japanese yen rose 0.4% to 153.95 per dollar

Cryptocurrencies

• Bitcoin fell 1.4% to $74,911.73
• Ether rose 4.6% to $2,813.77

Bonds

• The yield on 10-year Treasuries was little changed at 4.42%
• Germany’s 10-year yield advanced eight basis points to 2.48%
• Britain’s 10-year yield declined three basis points to 4.53%

Commodities

• West Texas Intermediate crude fell 0.7% to $71.16 a barrel
• Spot gold rose 0.3% to $2,666.13 an ounce

This story was produced with the assistance of Bloomberg Automation.

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