As the U.S. election nears its conclusion, it’s looking increasingly likely that America could see a return of Donald Trump to presidency. With the results still coming in, Trump has won key battleground states and currently holds a decisive lead in those that are remaining to be announced.
Late Tuesday evening, as votes continued to roll in, financial markets responded positively. U.S. stocks surged, with S&P 500 futures rising over 1%, and the dollar making its largest intraday gain against other currencies since 2020. Treasury yields also climbed, reflecting investor concerns that Trump’s policies might lead to increased spending and inflation.
The financial markets’ initial response signals optimism, with investors confident yet mindful of potential policy impacts and inflationary pressures in the coming months. Investors expect Trump’s administration – which is notoriously ‘pro-business’ – to focus on tax cuts and deregulation—policies likely to largely benefit Corporate America and domestic markets as well as net importers.
On Tuesday, China’s Caixin services PMI rose to 52 for October, surpassing expectations and improving on September’s performance. The manufacturing PMI also climbed to 50.3, signalling expansion in both sectors (given that PMI readings above 50 indicate growth). The data suggests that China’s economy may be gaining momentum, with supply and demand potentially benefiting from this year’s extensive stimulus measures that have been announced by policymakers.
Chinese markets responded positively to the news, with the Hang Seng index rising 0.3%, while most other Asian markets moved cautiously in anticipation of the U.S. election results. Market participants are now closely watching the ongoing session of China’s National People’s Congress Standing Committee, which began on Monday, for signs of additional fiscal support.
