A graph showing the performance of the DAX, Germany's stock market index, is displayed at the Frankfurt Stock Exchange. Photo by Reuters.
In the past week, global markets have been heavily influenced by the financial shifts triggered by Donald Trump's recent victory in the U.S. presidential election. Thursday's trading patterns maintained this trend, showcasing a surge in Bitcoin, climbing U.S. Treasury yields, and a robust U.S. dollar.
Interestingly, even with traders anticipating an over 80% chance of the Federal Reserve cutting interest rates next month after the latest inflation report, the dollar defied expectations. Despite a potential rate cut generally pushing the dollar down, it hit a one-year peak due to strong market optimism fuelled by Trump’s win.
Trump’s pledges to cut taxes are seen as a stimulus that could boost economic growth, widen budget deficits, and raise government borrowing – factors that have already contributed to the climb in long-term Treasury yields. Moreover, his proposed steep import tariffs are expected to drive up inflation, restricting the Federal Reserve's capacity to ease monetary policies soon.
With the Republican Party likely to hold control of both the Senate and the House of Representatives when Trump assumes office in January, he is positioned to implement his policies with little opposition.
On the European front, Thursday will see markets digesting the euro zone’s updated figures on economic growth for the third quarter as well as preliminary data on employment. Initial numbers from October had shown better-than-expected growth for the eurozone compared to the prior quarter. However, concerns remain, as industrial activity continues to slump and consumer spending has seen minimal growth.
Later on, the U.S. market will turn its attention to Federal Reserve Chair Jerome Powell’s address in Dallas, following the release of the October Producer Price Index (PPI) report. The PPI is closely watched as it has a direct impact on the Fed’s favoured inflation measure, the personal consumption expenditures price index, which is set for release later in the month.
Despite these insights, Powell’s comments on 2025 and beyond might be limited as they largely depend on the policy direction that Trump’s administration will take after the inauguration. Trump has already begun assembling his administration by appointing individuals for key roles, including positions related to defence, trade, immigration, and economic planning. According to sources, billionaire Howard Lutnick and investor Scott Bessent are potential candidates for the position of Treasury Secretary.
Key market events on Thursday that could sway market dynamics include the release of the second estimate for eurozone GDP for Q3, eurozone employment data for Q3, U.S. jobless claims, and October’s PPI report in the U.S., alongside Powell’s much-anticipated speech.
