Donald Trump won the US presidential election comfortably, securing more than 300 electoral college votes. US equities and the dollar rallied on the news while bonds initially sold off. The Republicans also secured control of the Senate and look likely to also gain a majority in the House of Representatives.
The US Federal Reserve (Fed) and Bank of England each cut rates by 25 basis points (bps).
UK
The FTSE 100 dropped 1.3% over the week.
The Bank of England cut rates by 25bps to 4.75%.
Rachel Reeves is expected to announce that she will accelerate the consolidation of the UK’s fragmented local authority pension funds so that they can invest more money into UK infrastructure projects.
US
The S&P 500 jumped 4.2% over the week, recording its best week so far this year, while the Nasdaq surged 5.3% in anticipation of tax cuts and looser regulation. Bitcoin was another beneficiary of the Trump win.
The Fed cut rates by 25 bps to a range of 4.5%-4.75%, slowing the pace of its easing after September’s 50-bps cut. Fed chair Jay Powell avoided commenting on the potential impact of a Trump presidency on the economy but insisted he would not step down early if asked to do so. Economists have warned that the US economy risks overheating given Trump’s proposed fiscal easing and there are concerns that Trump might use his position to undermine the Fed’s independence or any attempt to hike rates.
The University of Michigan consumer sentiment index soared to a seven-month high of 73 in November.
Europe
The Eurofirst 300 fell 1.0% over the week.
The German coalition government collapsed following the sacking of sacking finance minister Christian Lindner, leader of the smallest party in the alliance, as it failed to agree a budget. Chancellor Olaf Scholz originally called a confidence vote for mid-January but now says he may bring that forward, raising the prospect of much earlier snap elections.
Japan
The Nikkei 225 rallied 3.8% over the week.
Pacific Basin ex Japan
China, which could face a substantial hike in US tariffs when Trump regains the White House, announced a $1.4trn stimulus package. However, the package disappointed those looking for measures to boost consumer demand, focusing more on restructuring local government debt.
Chinese exports surged 12.7% year on year in October as companies accelerated shipments ahead of a potential Trump win. Imports declined 2.3% over the month.
China’s inflation rate fell to 0.3% year on year in October, compared to 0.4% in September. Producer prices in China fell by 2.9% year-on-year in October, the steepest drop since November 2023.
Emerging Markets
The MSCI EM Index rose 1.9% in USD terms over the week.
A sharp fall in the real has heaped pressure on Brazil’s left-wing government to introduce spending cuts and calm mounting investor concerns over its commitment to fiscal discipline. President Luiz Inácio Lula da Silva has pursued a tax-and-spend approach, boosting welfare payments to the poorest and help for homebuyers and debtors, but this has led to fears that inflation could accelerate again and interest rates rise. Brazil’s inflation rate in Brazil increased to 4.76% in October, the highest value in a year.
In October, Indian stocks saw the biggest monthly selling by foreign investors since the start of the pandemic amid growing concerns that the market’s bull run may finally be coming to an end as the economy slows.
Bonds
The yield on the 10-year US Treasury touched a four-month high of 4.48%, but closed the week at 4.31%, some 3 bps lower than the previous week. 2-year yields rose 6bps to 4.23%. Breakeven rates have increased by around 1% since September amid fears that Trump’s plans for tariffs and tax cuts will provide a “reflationary cocktail” for the US economy.
The yield on the 10-year German Bund closed the week 4bps lower at 2.37%, while 10-year JGB yields rose 6 bps to 1.0%.
