The markets' bet on fiscal spending, lower taxes and higher tariffs under incoming US President Donald Trump, the so-called "Trump trades" have taken a breather and traders' attention has returned to economic data. Potentially crucial US consumer price index data is coming out today. Instead dollar and Treasury yields are rose to the stars after last week's elections. The growing loan costs tend to make people nervous equity investors and are a particular burden for the technology stocks. Donald Trump has been naming candidates for government or his team late last night. Wall Street futures are pointing to further weakness after Tuesday's decline, and pan-European STOXX 50 futures are also down.
US Treasury yields skyrocket
I short-term treasury yields they increased slightly after touching the highest level since late July yesterday, when the market reopened after the Veterans Day holiday, pushing the US dollar at a peak more than three months against the yen. Bond yields have skyrocketed since Donald Trump was re-elected to the White House last week, on expectations that lower taxes and higher tariffs will increase government borrowing and widen the fiscal deficit. Trump's proposed policies are also seen by analysts as stoking inflation, potentially hindering the path to lower Fed interest rates.
The same expectations had pushed U.S. stocks to record highs, but the growth stalled overnight as bond yields have skyrocketedThe yield on Treasury bills at two years settled at 4,351% after jumping to 4,367% on Tuesday for the first time since July 31. The 10-year yield was hovering around 4,43%, not far from a four-month high of 4,479% reached a week ago in the wake of Trump's landslide victory. "There is significant technical resistance at 4,48%-4,50% in U.S. XNUMX-year yields," said Tony Sycamore, an analyst at IG. Reuters. “A break of this level with stronger-than-expected inflation today could pave the way for gains to extend towards the 4,75% resistance, a move that equity markets may find hard to ignore.”
Greenback Strong Against Yen and Euro
Rising bond yields have set the greenback alight. For the first time since July 30, the dollar rose as high as 154,94 yen, before changing hands for the last time at 154,88 yen.
This has put the currency pair, which tends to track long-term US yields, on the 155 yen per dollar threshold, a level that many market participants see as a trigger point for verbal intervention by Japanese authorities. Japan’s finance ministry’s monetary policy chief, Atsushi Mimura, said last week that officials “stand ready to take appropriate measures if necessary when excessive movements are seen.” Technically, if the dollar were to break above 155 yen, “there is a gap between 155 and 158, so the pair could quickly move up and test 158, where Japan’s finance ministry intervened in May,” said Shoki Omori, chief strategist on the Japan Desk at Mizuho Securities.
The U.S. dollar index, which measures the currency against the yen, euro and four other major rivals, settled at 106,03, not far from Tuesday's high of 106,17, its highest level since May 1. The euro traded at $1,0614, after falling to $1,0595 overnight, a one-year low. Europe, like China, is seen as the hardest hit by Trump's tariffs, with the new US president previously saying the bloc would "pay a heavy price" for not buying enough US exports.
Last night theS & P500 closed down 0,3% after five consecutive sessions of increases and three of all-time highs. Also the Bitcoin paused for breath after hitting an all-time high just below $90.000 in the previous session, with markets betting on Trump to usher in an easier regulatory environment after promising to make the United States “the crypto capital of the planet.” The token was trading around $87.295 as of 6.30:XNUMX a.m. this morning.
Commodities fall on China weakness
Le raw material I'm definitely weaker, as traders became concerned about the prospects for China, a key consumer, which is set to bear the brunt of Trump's threatened trade tariffs. Stimulus announcements from Beijing have so far failed to spark much optimism about an economic recovery. On Wednesday, prices of Copper fell slightly, on the back of a stronger dollar and weak demand prospects in the metals’ biggest consumer, China. Three-month copper on the London Metal Exchange fell 0,1% to $9.130 a metric tonne, and on Tuesday fell to $9.107 a tonne, its lowest level since September 11.
Oil crude continued to wallow near its lowest levels this month after OPEC cut its global oil demand growth forecast for this year and next on Tuesday, highlighting weakness in China and some other regions. Brent crude futures rose 0,3% to $72,07 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 0,2% to $68,27, not far from Tuesday’s lows, which were the weakest levels since Oct. 30. Gold attempted to regain its feet, rising 0,3% to around $2.604 an ounce, after falling to a nearly two-month low of $2.589,59 in the previous session under pressure from a strong dollar.
US Consumer Prices Today Will Point the Fed's Way for December
Potentially crucial data will arrive today on theUS consumer price index, which could reinforce or reverse the trend in rate cut expectations, and will kick off a busy series of days that will include comments from the Fed chairman Jay Powell Thursday, followed by retail sales on Friday. Economists are in agreement that the broad index is expected to warm slightly on a trend basis, to 2,6% from 2,4% in September, but to be steady at 3,3% on a core level. Stronger numbers could change expectations about Fed easing going into next year. The odds of a rate cut at the Fed's next meeting in December have been cut to just 62% from 77% a week earlier and 84% a month ago. Last week Powell pledged to continue on the path of cautious and patient monetary easing, saying the central bank would not try to “guess” Trump’s policies or their effect on the economy. Regional policymakers are expected to deliver speeches today. Fed Alberto Musalem, Lorie Logan and Jeffrey Schmid. Whatever Trump's agenda is, it should be easily approved by Congress, now that Republicans appear to have won a majority of seats in the U.S. House of Representatives, sealing the victory of the government
China issues dollar bonds to Saudi Arabia: $26 billion in demand
The CSI 300 of the Shanghai and Shenzhen stock markets is slightly up +0,6%. China has started the procedure to place Dollar bonds in Saudi Arabia, the country's first loan in U.S. currency since 2021. The operation has received more than $25,7 billion in orders this morning, according to sources. The Finance Ministry said earlier this month it would sell up to $2 billion in bonds. Beijing's move to raise funds in Riyadh, rather than London or New York, comes amid recent efforts to strengthen economic ties.
Many of the greatest Asian stock indices are down nearly 1% or more, including Japan's Nikkei, South Korea's Kospi and Australia's stock index. Hong Kong's Hang Seng is down 0,6%, having fallen twice as much earlier in the session. The area's benchmark, the MSCI Asia Pacific, is falling to a two-month low. Tokyo's Nikkei is down 1,5%, while the yen is nearing a three-month low against the dollar: the cross is at 154,8 this morning.
Japan's wholesale goods price increases rose at the fastest pace in 14 months in October and more than expected, supporting the central bank's monetary policy normalization goal. Elsewhere in Asia Pacific, the KOSPI Alone BSE Sensex loses 2% Mumbai, -0,7%.
European stocks seen opening lower
European stocks are expected to open lower, with the EuroStoxx 50 futures at -0,6%, from -2% yesterday. The FTSEMIB index in Milan closed down 2,1% yesterday.
Saipem. The Blackrock fund owns a 5% stake, of which 3,09% have voting rights, according to the latest Consob figures.
Monte Paschi Bank . Hsbc has initiated coverage with 'buy' and a target price of 7,2 euros. Major maneuvers are underway on the shares in view of the imminent placement of a new stake by the Treasury, a shareholder with 26,7%. Between last Wednesday and yesterday, the trading volumes have been unusually high: in the space of five sessions, more than 137 million MPS shares changed hands, almost 11% of the bank's capital for a value of over 720 million.
Intesa Sanpaolo . The five shareholder foundations of the bank that have already entered into a consultation agreement in the past – Compagnia Sanpaolo, Cariplo, Cariparo, Cr Firenze, Carisbo – are ready to ask the ECB for the green light to stipulate a new consultation pact aimed at presenting a list for the April renewal of the Board of Directors, writes the Messenger. A sixth entity, Fondazione Crc Cuneo, is added to the five, thus raising the institute's share included in the agreement from 14,6% to 15,7%.
Enel The Chilean subsidiary has decided to abandon the peso as its reference currency starting from January 1, 2025 and adopt the dollar. This is what was written MF adding that with the currency change the company will have to account for a perdita of 450 million dollars on the 2024 accounts which however will be neutralized by leveraging dividends.
StellantisGlobal sales of fully electric and plug-in hybrid vehicles rose 35% in October from the same month a year earlier, led by a 54% increase in sales in China, market research firm Rho Motion said on Monday. Sales in Europe rose just 0,8%, but grew on an annual basis for the second consecutive month and the research firm expects the region to have a strong end to the year, chief data officer Charles Leste told Reuters
Unicredit . Commerzbank is considering the acquisition of a mid-sized German bank as part of its strategy to fend off a possible takeover by the Italian bank, they said. Reuters three people briefed on the matter. HSBC raises target price to 50 euros.
Maire Tecnimont announces that Nextchem, through its subsidiary Stamicarbon (nitrogen fertilizer technologies), has been awarded the licensing and Process Design Package (PDP) for a tertiary abatement unit to be installed at Soluciones Químicas' nitric acid plant in Minatitlán, Veracruz, Mexico.
The European calendar is rather bare, with financial firms ABN Amro and Allianz leading the corporate earnings announcements. The Bank of England's Catherine Mann is due to speak today and could attract attention after the pound's sharp sell-off yesterday.
