Why Donald Trump’s victory led to a boom in stock markets but a collapse in currencies – Firstpost

Donald Trump’s victory in the US elections led to sharp growth in many markets around the world.

In America, the Dow and S&P 500 indices reached new heights.

In Asia, there was also a surge in Singapore’s Straits Times, Hong Kong’s Hang Seng, Taiwan’s Taiwan Weighted, Thailand’s SET Composite and China’s Shanghai Composite.

Meanwhile, a number of currencies fell after Trump’s victory.

But what happened? And why is this so?

Let’s take a closer look:

What happened to the stock markets?

According to CNNThe Dow Jones Industrial Average rose more than 1,500 points to a new record high.
after Trump’s victory.

Earlier in November 2022, the blue chip index surged over 1,000 points in a single day.

Meanwhile, the S&P 500 and Nasdaq also rose, the former up 2.5 percent and the latter up 2.95 percent.

Asia-Pacific stock markets also traded higher on Thursday, helped by record gains in US stocks the day before.

German DAX futures added 0.36% after falling 1.1% on Wednesday. Pan-European STOXX 50 futures rose 0.4% and UK FTSE futures rose 0.38%.

The Australian share index added 0.3% and the Taiwan index .TWII rose 0.8%. South Korea’s Kospi (.KS11) closed slightly higher, snapping a two-day decline.

Chinese markets lost ground on Wednesday due to the possibility of tariff hikes
during the next Trump presidencyrecovered in the last session.

Hong Kong’s Hang Seng (.HSI) rose 1.5 percent and mainland blue-chip shares (.CSI300) added 2.6 percent.

Why is this so?

The US market in particular is pleased that
clear idea of ​​who won appeared.

“It is now clear: we will not see another event on January 6th. The market is breathing a sigh of relief about this,” said Michael Block, chief operating officer of AgentSmyth. CNN. “The general consensus was that we won’t know. And we know.”

Experts say Trump’s victory
will most likely mark era of deregulation.

“There’s a huge sense of enacting a business-friendly, tax-friendly regime, especially after they won the Senate,” Block said.

“This was a market primed for an extreme reaction, one way or another,” said Art Hogan, chief market strategist at B Riley Wealth Management. “The market is saying: We just elected a business-friendly president. … The initial reaction to the Trump administration was met with enthusiasm that may prove temporary.”

Chris Weston, head of research at Pepperstone, said global investors could be shifting into U.S. stocks from markets such as China and Europe to benefit from Trump’s pro-growth policies.

“As a Republican victory in Congress becomes the base case for market participants, we are seeing traders shift to a ‘buy all US’ risk-on mentality,” he said.

“The US dollar has always been the purest expression of the Trump presidency, and even more so the red sweep.”

However, not all stock markets were in a celebratory mood.

While Japan’s broader Topix index .TOPX gained 1 percent, its tech-heavy Nikkei 225 index .N225 posted losses.

The Sensex, which had risen 800 points on Wednesday morning as news of Trump’s victory began to trickle in, fell more than 800 points on Thursday, essentially erasing all the previous day’s gains.

Meanwhile, Nifty is at 24,206, recording a fall of nearly 300 points.

In India, foreign investors sold more than $1.5 billion worth of shares in November, adding to outflows of $11 billion in the previous month.

Experts say Indian investors should be careful.

“The Trump trade, which sent US markets soaring, is unlikely to have the same positive impact on India as Indian market valuations are high and there are headwinds in the form of slowing earnings. Investors should focus on quality and value during this period of euphoria and uncertainty,” said Dr. V.K. Vijayakumar of Geojit. Economic times.

“The Republican war cry of ‘Make America Great Again’ is likely to lead to stronger economic growth in the US, which favors US markets relative to other emerging markets such as India. Emerging economies are even less likely to find favor with asset allocators, especially in light of likely worsening global geopolitics and trade. FPI outflows from India may accelerate in the near future given the dominance of passive inflows in FPI flows,” added Sanjeev Prasad of Kotak Institutional Equities.

What about currencies?

A number of currencies, including the Indian rupee, Singapore dollar, Thai baht and Mexican peso, fell after Trump’s victory.

The Indian rupee fell to its lowest ever on Thursday amid expectations that Donald Trump’s victory is likely to strengthen the dollar in the coming months.

The rupee fell to 84.2950, ​​slightly breaking the previous all-time low of 84.28 hit on Wednesday.

The Singapore dollar and Thai baht fell the most among Asian currencies on Wednesday, while the Mexican peso fell to a two-year low.

The Singapore dollar was last down 1.3% to a three-month low and hit its worst level since August 2015.

The Thai baht fell 1.9% to a two-month low, its biggest one-day fall since February 2023.

Iran’s currency fell to a record low on Wednesday as Donald Trump returned to the US presidency.

Why did this happen?

Analysts view Trump’s proposed tariff and immigration policies as inflationary and therefore likely to put upward pressure on prices, bond yields and the dollar, as well as undercut the currencies of trading partners.

Trump’s tax cuts and deregulation policies are likely to boost U.S. economic growth by encouraging investors to favor the dollar over other currencies, analysts say, adding that the threat of tariffs is likely to undermine the euro and Asian currencies.

The Indian rupee is also under pressure due to persistent outflows from Indian equities.

RBI intervention and India’s inflation differential with the rest of the world will determine the potential for further depreciation of the rupee, Citibank analysts said.

Investors are now awaiting a policy decision from the US Federal Reserve, due after midnight EST.

The Fed is expected to cut rates by 25 basis points, while investors will look to Chairman Powell’s comments for guidance on how the benchmark interest rate will move going forward.

Ken Chung Kin Tai, chief Asia currency strategist at Mizuho Bank: “Regional investors are particularly concerned about the impact of tariffs as most Asian economies rely on trade growth.”

The Chinese yuan and Mexican peso are considered most vulnerable to a stronger dollar and higher tariffs under Trump.

The yuan was last down 0.8 percent and the peso fell to 20.7080 for the first time since August 2022.

MUFG analysts believe a Trump victory would hit the South Korean won, Singapore dollar, Thai baht and Malaysian ringgit more than other Asian currencies due to their export orientation and sensitivity to a potential slowdown in China’s economic growth.

The ringgit, Southeast Asia’s best-performing currency this year, was last down 1.5%.

Malaysia’s central bank, as expected, kept interest rates unchanged and said it was monitoring the US elections and was prepared to manage market volatility and ensure orderly market conditions.

The Indonesian rupiah fell 0.7% to a nearly three-month low. The central bank governor said the focus in the short term is on the stability of the rupee amid the US election results.

The official said the central bank is also prepared to stabilize the rupee, including through steps such as intervention, if there is excessive volatility.

For Iran, this means new challenges as it remains embroiled in the wars raging in West Asia.

The fall comes as the rial already faces significant challenges from a sharp depreciation and as sentiment on the streets of Tehran has worsened among some.

“One hundred percent he will tighten sanctions,” said Amir Aghayan, a 22-year-old student. “What is not in our favor will be worse. Our economy and social situation will certainly worsen.”

He added: “I feel like the country is going to explode.”

In 2015, during Iran’s nuclear deal with world powers, the rial traded between $32,000 and $1. On July 30, the day Iranian reformist President Masoud Pezeshkian was sworn in and began his term, the rate was 584,000 to $1.

Trump unilaterally withdrew America from the agreement in 2018, sparking years of tension between the countries that persist today.With the participation of agencies

Get all the latest updates
US elections 2024

Get all the latest news about the 2024 US elections.