Wall Street celebrates Donald Trump‘s clear victory in the US presidential elections but is alone, Asia and Europe are distancing themselves, fearful above all of tariffs.
The ones who flew were the dollar, Bitcoin, which marked new historic highs, the stock market and in particular the Nasdaq where supporter Elon Musk’s Tesla (+14%) took off like a rocket. Yields on American government bonds then rose while raw materials, starting with oil, were overall weak. The increase in votes in favor of the Republican candidate had caused Chinese stock markets to fall, opening a gap in Asia where instead Tokyo (+2.6%) made a leap while the yen extended its losses against the dollar. In Europe the start was optimistic, driven by futures on Wall Street which suggested a start with a bang but the possible repercussions on companies in the automotive and renewable energy sectors changed the face of the session.
Milan closed down by 1.54%, Frankfurt by 1.13%, Paris by 0.5% while London, after changing direction several times, limited the decline to 0.07 percent. Madrid is the worst with -2.93%. And with markets closed, ECB vice-president Luis de Guindos warns of the “enormous” impact that Trump’s duties could have: “If an important jurisdiction like the USA imposes 60% duties on another relevant jurisdiction , let’s say China, I can assure you that the direct and indirect effects and trade diversion would be enormous,” de Guindos said.
Investors therefore processed the so-called ‘Trump trade’ very differently on both sides of the ocean. On Wall Street, the election outcome is also appreciated because it does not risk being contested and the impact on the markets that will benefit from the Republican president’s policies is immediate. Tax cuts, deregulation and tariffs, if implemented, should result in economic growth in the United States and consequently in the profits of American companies. However, as a ‘collateral’ effect they risk increasing inflation. The Federal Reserve, which meets Thursday for an expected rate action of 0.25%, will limit interest rate cuts going forward.
Hence the reason for the decline in the value of treasuries and the rise in yields also linked to concerns about the deficit and the sustainability of US debt. Shadows which for now do not frighten the stock markets but which make the financial community reflect on the risks to the American economic outlook and within it fuel doubts about the independence of the central bank during its second mandate. For the Fed and its commitment to reducing inflation to the 2% target while protecting the job market, Trump’s policies could represent an obstacle.
The protectionist policy instead helped the dollar by making the greenback gain ground on all other currencies starting from the euro which lost over 2% (to 1.0683 dollars, the lowest since 2016) and then recovered ground and in the evening return to the values of the day before at 1.0749 dollars. The tycoon’s promise to make the United States the world capital of cryptocurrencies, with regulation that favors the growth of the sector, has sent Bitcoin soaring to historic highs (over 75 thousand dollars), putting the threshold of 80,000 dollars in his sights.
