Authored by Dhara Ranasinghe and Koh Gui Qing
NEW YORK/LONDON (Reuters) – The U.S. S&P 500 surged past 6,000 points on Friday to set a new record, while Treasury yields retreated. Investors celebrated Donald Trump’s decisive victory, although disappointment over China’s fiscal support dampened the mood in other markets.
Following the Federal Reserve’s expected quarter-point rate cut, focus shifted back to the aftermath of the U.S. presidential election and news from Beijing.
The dollar weakened, and U.S.-listed shares of Chinese companies and China-exposed sectors in Europe declined as investors reacted to China’s stimulus plan that did not directly inject funds into the struggling economy.
Despite the lack of a substantial Chinese fiscal stimulus, investors on Wall Street remained optimistic and bought U.S. stocks. The S&P 500 reached an intraday high of 6,012.45 points before closing up 0.4%. The Dow rose 0.6%, while the Nasdaq ended flat%.
The S&P 500 and the Dow recorded their best week in a year, while the Nasdaq saw its best week in two months. Shares of electric car maker Tesla (NASDAQ:), supported by CEO Elon Musk’s backing of Trump, soared 8.2%, pushing its market cap to $1 trillion for the first time since 2022.
Nicholas Colas, co-founder of DataTrek Research LLC, cited reasons for investing in U.S. stocks: “The Fed is cutting rates, and the U.S. economy remains strong.” Additionally, the Republican party’s victories in the elections may lead to lighter regulation and tax cuts, boosting the U.S. economy.
While markets in the United States flourished, the mood was more subdued internationally. The pan-European lost 0.7%, and a MSCI world stocks index remained flat after reaching a record high on Friday. Despite this, the world stocks index had its best week in three months.
Chief markets strategist at Zurich Insurance Group (OTC:), Guy Miller, commented on the potential for U.S. stocks due to the election outcomes and anticipated improvements in the U.S. economy.
The stock index fell 0.8% following its best daily performance of 2024, driven by expectations of Germany scrapping its debt brake.
CHINA DISAPPOINTS
China announced a 10 trillion yuan ($1.40 trillion) debt package to ease local government financing strains and stabilize economic growth.
Analysts noted that Beijing might hold back on further stimulus before Trump’s official takeover in January. Mainland blue chips fell 1% after a 3% rise, and Hong Kong’s also slid, indicating caution ahead of the announcement.
The offshore dropped 0.7% to 7.2011 per dollar. China-exposed European luxury and mining stocks each declined over 3%.
FED CUTS
U.S. Treasury yields decreased after Fed Chair Jerome Powell signaled a continued, patient approach to policy easing.
The Fed’s rate cut, alongside cuts by the Bank of England and Sweden, drove a decline in ten-year Treasury yields to 4.343%.
Powell assured that the election result would not impact U.S. monetary policy in the near term.
Amundi Investment Institute’s head of global macroeconomics, Mahmood Pradhan, highlighted the uncertain economic outlook and a potential shift in policy direction under the new administration, leading to a measured pace of easing next year.
The rose to 104.91 against six major peers after a 0.7% drop on Thursday. The euro and sterling weakened against the dollar, while the dollar slipped 0.3% to 152.46 yen.
rallied 0.8% after hitting a record high, following a nearly 10% surge during the week. Trump’s commitment to positioning the U.S. as a crypto hub influenced the market.
Gold fell 0.9% to $2,683.87 following a volatile week. Oil futures and U.S. West Texas Intermediate crude also experienced declines during London trade.
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