FX.co ★ Trump Victory To Trigger Initial Rally On Wall Street

U.S. index futures are signaling a considerably higher opening for stocks on Wednesday, likely continuing the upward trend observed in the previous trading session. This strong Wall Street momentum is attributed to former President Donald Trump's victory over Vice President Kamala Harris in the presidential election.

Trump's success in key swing states has secured him more than the requisite 270 Electoral College votes for a return to the presidency. Markets generally perceive Trump as favorable to corporate interests, expecting him to extend the tax cuts from his first term, set to expire in 2025. Additionally, his administration is anticipated to reduce government regulations and adopt a less restrictive approach to mergers and acquisitions.

However, Trump's proposed increase in tariffs on China and other nations could potentially stir inflation worries. "Tariffs and increased prices may result in prolonged higher interest rates, adversely impacting the housing market and related sectors," stated Neil Saunders, Managing Director of GlobalData. He further noted, "Although Trump has advocated for lower interest rates and greater influence over rate setting, such changes are not immediately feasible for him to implement."

The Republicans appear poised to regain control of the Senate for the first time in four years, though the contest for the House remains unresolved. With the elections largely concluded, focus shifts to the Federal Reserve's impending monetary policy announcement scheduled for Thursday.

The Federal Reserve is expected to decrease interest rates by 25 basis points; however, the accompanying statements might affect expectations for future rate modifications. Stock markets demonstrated unpredictability on Monday, closing slightly down. Yet, Tuesday witnessed a strong rally, particularly propelled by the tech-heavy Nasdaq.

The primary indices concluded the session well above Monday's losses, with the Nasdaq jumping 259.19 points, or 1.4%, to end at 18,439.17; the S&P 500 increased by 70.07 points, or 1.2%, to 5,782.76; and the Dow gained 427.28 points, or a 1.0% rise, closing at 42,221.88. The general optimism reflects confidence in the ongoing robust performance of the stock market and the broader U.S. economy regardless of electoral outcomes.

Contributing to this optimistic outlook, a report from the Institute for Supply Management indicated an unexpected acceleration in service sector activity for October. The ISM's services PMI rose to 56.0, up from 54.9 in September, surpassing economist predictions of a decline to 53.8, marking its highest level since July 2022.

Conversely, a report from the Commerce Department noted a considerable widening of the U.S. trade deficit in September, driven by surging imports and declining exports. Airline stocks saw a significant rise, with the NYSE Arca Airline Index climbing 2.8%. Housing stocks also showed strength, reflected in the 2.3% increase of the Philadelphia Housing Sector Index. The biotechnology sector continued its upward trend, with the NYSE Arca Biotechnology Index rising by 1.6% to its strongest closing level in over three years. Gains were also visible across brokerage, computer hardware, and semiconductor sectors.

**Commodity and Currency Markets**

Crude oil futures are dropping $1.92 to $70.07 per barrel, following a $0.52 rise to $71.99 per barrel on Tuesday. Gold is trading at $2,688.70 per ounce, down $61 from Tuesday's closing price of $2,749.70, after a modest increase of $3.50 the previous day.

In currency markets, the U.S. dollar is trading at 154.15 yen, up from 151.62 yen at Tuesday's close in New York. Against the euro, the dollar is valued at $1.0710, down from $1.0930 the day before.

**Asia**

Asian stock markets delivered mixed results on Wednesday. The U.S. dollar and bond yields edged higher following Trump's victories in North Carolina and Georgia, solidifying his position in critical battleground states. Japanese markets benefited from a weaker yen, while Hong Kong shares faced setbacks amid concerns that Trump's proposed tariff policies might reignite U.S.-China trade tensions.In the Asian market, gold prices fell by nearly 1% due to a stronger dollar, while oil prices dropped over 1% following data indicating an increase in U.S. crude stockpiles.

China's Shanghai Composite Index showed fluctuation but ended slightly lower at 3,383.81 after the People's Bank of China expressed intentions to intensify counter-cyclical monetary policy at a widely observed meeting. The National People's Congress Standing Committee, expected to conclude on Friday, is anticipated to approve further stimulus measures.

In Hong Kong, the Hang Seng Index plummeted by 2.2% to 20,538.38 amidst concerns regarding more protectionist policies under President Trump.

Japanese equities saw significant gains, driven by the U.S. dollar climbing to a three-month high in the lower 154-yen zone, thereby benefiting export-driven stocks. The Nikkei 225 Index rose by 2.6% to 39,480.67, having briefly surged over 3%. The broader Topix Index ended 1.9% higher at 2,715.92.

Financial firms like Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group experienced surges of 5.7% and 6.9%, respectively, due to the anticipation of higher bond yields under Trump's leadership. Semiconductor-related stocks, including Advantest and Tokyo Electron, increased by 8.2% and 2.3%.

Seoul stocks concluded lower, with the Kospi falling 0.5% to 2,563.51, driven by surges in bond yields linked to the expectation of Trump’s victory in the U.S. presidential election.

Australian markets rallied significantly, led by gains in banks and technology stocks. Companies like WiseTech Global, Commonwealth Bank, Westpac, NAB, and Xero saw increases of 1-2%. The S&P/ASX 200 Index rose by 0.8% to 8,199.50, with the broader All Ordinaries Index also closing 0.8% higher at 8,456.

In New Zealand, the benchmark S&P/NZX-50 index ended marginally lower at 12,649.17 following a volatile session, as employment data revealed a smaller-than-expected rise in the jobless rate for the third quarter.

**Europe**

European stock markets showed general positivity on Wednesday after former U.S. President Donald Trump was declared the winner of the presidential race, having secured several pivotal swing states. In an address earlier today, Trump suggested this victory would aid in "healing" the nation.

Investors welcomed a survey indicating that Eurozone business activity remained stable last month, a slight upturn from September's modest downturn. Another report showed a recovery in Germany’s factory orders in September, driven by robust demand for aircraft and other transport equipment.

According to Destatis, factory orders rose by 4.2% on a monthly basis in September, following a revised 5.4% decline in August. Consequently, the German DAX Index increased by 0.3%, while the French CAC 40 Index and the U.K.'s FTSE 100 Index both gained 0.8%.

In London, Lancashire Holdings' shares soared after the British specialty insurance and reinsurance firm reported a 9% year-on-year growth in gross written premiums (GWP), reaching $1.7 billion for the first nine months of 2024. Lloyd's insurer Beazley also climbed, maintaining their full-year undiscounted combined ratio forecast of approximately 80%.

Prudential likewise saw a rise after announcing an 11% increase in new business profit for the initial nine months of fiscal 2024. Marks and Spencer's shares surged significantly after surpassing first-half profit expectations.

Siemens Healthineers experienced a sharp increase in its stock following reports of revenue growth and full-year adjusted EBIT in line with projections. Conversely, homebuilder Persimmon's shares dropped, as it warned of emerging construction cost challenges in 2025 price negotiations.

French financial institution Credit Agricole experienced a slump after disclosing mixed third quarter results, with weaknesses in some retail units overshadowing record revenues in its investment banking sector.

Pharmaceutical firm Evotec SE plummeted following declines in revenue and profits over the first nine months of the year. Sportswear brand PUMA similarly fell after reporting lower-than-expected third-quarter sales.

Automaker BMW faced a significant drop after a reported 61% decline in third-quarter profits.

**U.S. Economic Update**

The Energy Information Administration is scheduled to release data on oil inventories for the week ending November 1st at 10:30 am ET. Expectations are for crude oil inventories to rise by 1.8 million barrels, following a decrease of 0.5 million barrels in the preceding week.

Furthermore, at 1 pm ET, the Treasury Department will disclose results from the $25 billion auction of thirty-year bonds set for this month.