General Market Analysis – 07/11/24

US Market Surge After Trump Election Victory – Dow Up 3.5%

US stocks rallied yesterday following Donald Trump’s re-election as President of the United States. Leading the charge, the Dow closed up 3.57%, driven by financial firms capitalising on anticipated regulatory easing. The S&P gained 2.53%, while the Nasdaq rose 2.95%, closing the day firmly in positive territory. US Treasury yields also surged, with the 2-year yield climbing 7.5 basis points to 4.278% and the benchmark 10-year yield up 15.3 basis points to 4.441%—levels not seen since July. The dollar strengthened significantly, with the DXY rising 1.40% to close at 105.15, also reaching levels last seen in early July. However, oil and gold prices declined as the dollar appreciated, with Brent down 0.81% to $74.92, WTI down 0.42% to $71.69, and gold taking a hit of 2.8% to close at $2,667.19.

Fed in Focus Today Following Trump Victory

This week has always promised heightened activity for market participants, but now we find ourselves in the eye of the storm. With a decisive US election result in place, the markets are set to embrace another term of Trump volatility. However, the immediate focus turns to the Federal Reserve’s decision later today, with a 25-basis point rate cut widely anticipated. Market watchers are keenly awaiting how Fed Chair Jerome Powell will address the potential inflationary impact of the Republican victory—already reflected in the market response—while announcing a rate cut. This promises to be a challenging press conference for Powell, potentially stirring further market volatility.

Market Volatility Likely to Continue Today

Global financial markets are expected to remain volatile today as investors continue to adjust their positions after Trump’s significant election victory and in anticipation of key central bank rate announcements. While the Asian session has a relatively quiet calendar, attention will shift to the UK once the London session opens, with the Bank of England poised to announce its latest rate decision, likely a 25-basis point cut. The New York session is expected to be even more eventful, with the latest Fed rate decision due at the close. Midway through the session, weekly unemployment claims will be released before attention turns to Washington D.C., where the Federal Reserve is anticipated to cut rates by 25 basis points.

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