The rally in global markets since the election of Donald Trump as the next U.S. president was showing signs of running out of steam Monday as bond investors fretted over the inflationary impact of his policies. That rise in U.S. bond yields saw the dollar notch up some further solid gains, though.
KEEPING SCORE: In Europe, France’s CAC 40 was up 0.3 percent at 4,500, while Germany’s DAX advanced 0.3 percent, too, to 10,703. The FTSE 100 index of leading British shares was 0.2 percent higher at 6,745. U.S. stocks were poised for a steady opening, with Dow futures and the broader S&P 500 futures up 0.1 percent.
TRUMP FACTOR: Stock investors have largely reacted positively to the prospect of a Trump presidency. They have wagered that Trump and a Republican-controlled Congress will boost infrastructure spending, cut taxes and relax regulations that affect energy, finance and other businesses.
U.S. BONDS/DOLLAR: However, the view in bond markets is somewhat different, with investors fretting over the inflation outlook and the more lax spending environment. The yield on 10-year Treasury bonds is up 0.09 percentage points Monday at 2.24 percent. The rise in U.S. bond yields has helped support the dollar as traders price in the prospect of bigger returns on their holdings. The euro was down 0.9 percent at $1.0761 while the dollar rose 1.2 percent to 107.93 yen.
ANALYST TAKE: “Expectations of an infrastructure spending spree, fiscal stimulus and deregulation are, however, intensifying the bond market sell-off via hopes of growth, inflation and, more importantly, interest rate rises,” said Mike van Dulken of Accendo Markets.
JAPAN HOPES: The dollar has been particularly strong against the Japanese yen and that’s really helped the country’s exporters — the Nikkei 225 stock average added 1.7 percent to finish at 17,672.62. Further buoying sentiment in Tokyo was the news that the Japanese economy grew by 2.2 percent in annualized terms in the third quarter of the year.
ELSEWHERE IN ASIA: the Shanghai Composite rose 0.5 percent to 3,210.37, but most other Asian markets fell. Australia’s S&P/ASX 200 slipped 0.5 percent to 5,345.70 and South Korea’s Kospi lost 0.5 percent to 1,974.40. Hong Kong’s Hang Seng slipped 1.4 percent to 22,212.25. Markets in Southeast Asia fell, with Indonesia’s benchmark down 2.2 percent.
ENERGY: Benchmark U.S. crude fell 60 cents to $42.80 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, used to price international oils, lost 47 cents to $44.28 a barrel in London.
