Global stock markets saw a 1% increase on Tuesday, as investors awaited President-elect Donald Trump’s cabinet picks and assessed the outlook for U.S. interest rates. U.S. bond yields and the dollar eased off multi-month highs, reflecting cautious market sentiment.
Tech stocks gained, following Wall Street’s recovery from last week’s sharp losses, although anticipation around Nvidia’s earnings report, due Wednesday, limited larger movements. The MSCI World Index, which tracks global equities, rebounded from a four-day losing streak with a modest 0.35% increase on Monday, and continued its upward trend on Tuesday with a 1% rise.
U.S. markets have reduced expectations for a Federal Reserve interest rate cut in December, with a 59% probability of a quarter-point reduction, down from 62% the previous day, according to CME FedWatch. Analysts suggest that Trump’s fiscal plans, including increased spending, higher tariffs, and stricter immigration policies, could be inflationary, making it less likely the Fed will reduce rates amid persistent economic resilience.
While Trump has made several key appointments, including health and defense roles, the financial markets are closely watching the selection of Treasury Secretary and U.S. Trade Representative.
European stocks also saw positive movement, with the STOXX 600 rising 0.2%, Japan’s Nikkei gaining 0.5%, and Australia’s equity benchmark reaching a record intraday high with a 0.8% increase. Taiwan’s market advanced by 1.3%, though Chinese stocks were subdued. Mainland blue chips dropped 1.2% as investors weighed the potential impact of Trump’s trade policies and awaited more information on China’s economic stimulus plans. U.S. S&P 500 futures pointed higher by 0.1%, following a 0.4% gain in the previous session.
Kyle Rodda, senior financial markets analyst at Capital, noted that the market’s movements are largely driven by speculation about how Trump’s policies could affect economic conditions, international trade, and global geopolitics. He added that the markets are recalibrating expectations for the Fed’s future rate cuts.
Dollar Declines, Yields Ease
U.S. Treasury yields fell, with the two-year yield dipping to 4.2655% and the 10-year yield edging lower to 4.3844%. This contributed to the dollar’s weakness, which remained near Monday’s low. The dollar index, tracking the U.S. currency against a basket of six major peers, hovered at 106.23, close to Monday’s trough of 106.12. The greenback had hit a one-year high of 107.07 last week.
The yen gained strength, partly due to comments from Japanese Finance Minister Katsunobu Kato, who emphasized that Japan would “respond appropriately to excessive moves” in the yen exchange rate. The dollar sagged 0.17% to 154.16 yen, while edging up slightly against the euro to $1.0586.
Bitcoin, which surged to a record high of $93,480 last week on speculation about favorable cryptocurrency regulation under Trump, hovered near that peak on Tuesday, rising 0.37% to $91,688. Meanwhile, gold, a safe-haven asset, saw a modest gain of 0.28%, trading at $2,619 after a near 2% jump on Monday, its largest one-day advance since mid-August, as concerns over the Russia-Ukraine conflict escalated.
Oil Prices Hold Steady Amid Norway Field Shutdown
Oil prices remained stable after a $2 per barrel increase in the previous session. Brent crude futures edged down 0.2% to $73.14 per barrel, while U.S. West Texas Intermediate crude futures were slightly lower at $68.97 per barrel, a 0.27% drop. The oil market was supported by the shutdown of Norway’s Johan Sverdrup oilfield due to a power outage, which has impacted global supply.
As geopolitical risks rise, markets will continue to assess the potential economic impact of Trump’s policies and global trade tensions, while keeping an eye on the Federal Reserve’s next moves.
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