[UNITED STATES] On November 6, the US dollar climbed and Bitcoin reached a new high, while several stock markets advanced as speculators gambled on Donald Trump's victory as early presidential election results came in.
While polls have revealed a razor-thin battle for the White House, the Republican looked to be outperforming his Democratic opponent and Vice President Kamala Harris in early estimates. Both candidates scored predicted victories in safe areas, but signs that the business magnate was gaining ground fueled the so-called Trump Trade.
The early results sent shockwaves through global financial markets, with investors scrambling to adjust their portfolios in anticipation of potential policy shifts. The prospect of a Trump presidency reignited discussions about his previous term's economic policies, particularly his stance on trade and fiscal measures. Market analysts noted that the initial reaction was reminiscent of the 2016 election night, when Trump's unexpected victory led to significant market volatility.
Signs that the former president's party was performing well in Congressional contests raised the likelihood of massive tax cuts, tariffs, and deregulation. Trump's proposal of tax reduction may provide Corporate America a significant boost,
Trump's measures might also limit the Fed's ability to decrease interest rates in the future, boosting the currency further. The US dollar rose 1.6% versus the Singapore dollar to 1.3351 as of 11.55 a.m. Singapore time. The dollar surged 1.5 percent to 154.33 yen, its best level since July, while also rising more than 1% versus the euro and more than 2% against the Mexican peso.
The currency markets' reaction was particularly pronounced, reflecting the potential for significant shifts in international trade relations under a second Trump administration. Emerging market currencies faced increased pressure, with investors factoring in the possibility of renewed trade tensions and a more protectionist US stance. Currency strategists emphasized that the full impact on foreign exchange markets would likely unfold over the coming days as more definitive results emerged.
The dollar's climb against the yen boosted Tokyo equities by more than 2%, owing to gains in exporters. While Shanghai, Sydney, Seoul, Wellington, Manila, and Taipei all rose, China, Hong Kong, and Jakarta fell.
In the United States, S&P 500 futures rose 1.2 percent, while Nasdaq futures rose 1.3 percent. At lunchtime, Singapore's Straits Times Index remained steady.
Japan's Nikkei index rose 2.9% as a higher dollar pushed on the yen, which normally supports the country's export-driven economy. Stocks in mainland China and Hong Kong declined. Trump has assured voters that he will slap tariffs of 60% or more on Chinese imports.
The prospect of renewed US-China trade tensions sent ripples through Asian markets, with technology and manufacturing sectors particularly affected. Analysts pointed out that the potential for increased tariffs could disrupt global supply chains and impact multinational corporations operating in the region. Some economists warned that escalating trade conflicts could pose risks to global economic growth, potentially offsetting any short-term gains from proposed tax cuts.
China's blue-chip CSI300 Index declined 0.27 percent, while Hong Kong's benchmark Hang Seng plummeted 2.5 percent. JD.com, the e-commerce behemoth, dropped more than 5% in Hong Kong, while Meituan and Alibaba fell over 4% each.
Bitcoin surged over $6,000 to a record $75,005.06, surpassing its previous high of US$73,797.98 in March. During the campaign, Trump promised to make the United States "the world capital of bitcoin and cryptocurrencies".
While the major swing states were too close to call, early counts showed Trump ahead in Georgia, and traders were keeping a watch on other incoming data.
"Georgia starting to glow red may have been the trigger," said Max Gokhman of Franklin Templeton Investment Solutions, alluding to early exit surveys. "If I had to pick one asset as a barometer of Trump sentiment it would be Bitcoin."
Analysts said attention was also focused on Congressional contests, with a clean sweep for Trump and Republicans expected to raise the dollar and Treasury rates due to his intentions to reduce taxes and impose tariffs on imports.
Republicans' control of the Senate and House may result in significant changes to spending or tax policy. Still, Stephen Innes of SPI Asset Management believes that legislative deadlock might be the ultimate volatility suppressor.
Such a Republican victory might cause problems for Federal Reserve Chairman Jerome Powell as he fights to keep inflation under control, given that Trump's policies are regarded inflationary.
The potential implications for monetary policy were not lost on market participants. Speculation grew about how a Trump administration might influence the Federal Reserve's independence and decision-making process. Some economists expressed concern that political pressure could complicate the central bank's efforts to manage inflation and maintain economic stability. The bond market, in particular, showed signs of adjusting to the possibility of a more expansionary fiscal policy, with yields on long-term Treasuries inching upward.
The election comes as the Fed prepares to make its latest policy decision on November 7, with predictions that interest rates would be trimmed by 25 basis points, down from 50 in September.
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