Morning Brew November 7 2024

Good Morning,

 What a day! Democrats conceded the election to Donald Trump, and traders celebrated the outlook of a second term. Equities soared in huge volumes, crypto gained, yields and the USD gained, and the VIX fell. The Dow gained more than 1,500 points or 3.5%, the S&P rose 2.5%, and the Nasdaq 2.95%. The Russell 2000 rose almost 6%. Volume on U.S. exchanges was 18.68 billion shares, compared with the 12.15 billion average over the last 20 days.

International stocks were under strain due to concerns over potential tariffs, with the STOXX 50 falling 1.5%. The auto sector was hit hard, with BMW leading the decline at -7% on a disappointing result and outlook. The DAX lost 1.1%, and the Hang Seng 2.2%.

Trump Media as well as Tesla had great days at +6% and +14%, respectively. Novo Nordisk traded in severe swings as the stock gained from 746 to 812, then fell to 749.

US yields rose across the board, with the 10-year testing the 4.5% level.Althea commented on the devlopment:

Significant Yield Surge: Long-duration Treasury yields, especially the 30-year and 10-year, are rising sharply in response to expectations of inflationary policies under Trump, such as tax cuts and increased spending. This has created a pronounced steepening in the yield curve.

• Technical Resistance and Market Implications: The 10-year yield is approaching key resistance at 4.47%. A break above this level could lead to further selling in Treasuries and continued upward pressure on yields.
• Supply Pressure from Auctions: A supply-heavy auction schedule, including $25 billion in 30-year bonds, is adding pressure. Typically, rising yields attract investors, but election-related uncertainty may limit demand, potentially worsening the sell-off.
• Fed’s Influence and Bear Steepening Risk: Ahead of the FOMC meeting, traders are cautious about the Fed’s response to rising yields. If the Fed cuts rates without addressing long-term yield rises, a “bear steepening” effect could emerge, with long-term yields climbing despite short-term rate cuts.

The comments on the cause for the surge were rather interesting, as some commentators focused on the inflationary influence of Trump's expected tariffs, while others saw great growth potential and a strong economy under Trump as the reason.

The high yields boosted the USD Index to above 105, and EURUSD lost almost 2%. The Mexican Peso had a curious day, with the rate against the USD going from 20.06 to 20.80, only to recover to 20.1.

Industrial as well as precious metals lost massively, with Gold down 3.1%, Silver down 4.5%, and Copper down 5.1%. Gold is trading at 2,660, and Silver at 31.10.

In other news, the German coalition broke yesterday, and a call for an early election is expected. Today, we expect rate decisions by the Swedish, Norwegian, British, and US Central Banks, with the focus clearly ahead on the US if there is any attention left besides the focus on the election results. Sweden is expected to cut 50 basis points, the Norwegians are seen to take no action, and the Bank of England and the Federal Reserve should cut rates by 25 basis points.

I believe we will see continued volatility in the next few days until we get a clearer picture of what to expect from Trump 2.0.

We are hosting a Webinar on our initial take at 13:00 CET,:  Global markets will be shaped by the trajectory of the US economy and fiscal and monetary policy in 2025. Is your portfolio ready for the new US president set to take office in January? This webinar features special guest Blu Putnam, former Economist with CME Group.

Trade carefully and keep your risk under control!

Thursday

• Data: DE Industrial Production, Sweden, Norway, UK, and US Rate Decisions
• Earnings: Moderna, Barrick Gold, Halliburton, Rivian, The Trade Desk, Pinterest, Airbnb

Friday

• Data: Canada Labor Data
• Earnings: Sony