World markets move ahead in next rally of ‘Trump trade’

(Bloomberg) — As global monetary markets began to reopen following Donald Trump’s assassination attempt, some predicted the most likely possibility: The Trump business gains further momentum.

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The layout of the bet — in response to the possibility that Republicans’ move back into white space would bring tax cuts, upper price lists and looser regulations — was already paying off because of President Joe Biden’s disappointing efficiency in the latest era of debates. had jeopardized their re-attempt. Election campaign.

Although trades were expected to push reserves higher, Trump inspired supporters and later drew relief by showing defensive resilience after being shot in the ear at a Pennsylvania rally.

The greenback – which could be saved from reducing fiscal coverage by increasing bond payments – began to move towards its peers in early trading in Asia, with Mexico’s peso leading the way, weakening 0.3%. Went. Bitcoin surged above $60,000, possibly reflecting Trump’s crypto-friendly stance, Trailing futures on the S&P 500 index for September rose 0.1% at 06:05 p.m. in Fresh York.

“For us, this news reinforces that Trump is the frontrunner,” said Mark McCormick, global head of foreign exchange and emerging markets strategy at Toronto Dominion Storage. “We remain bullish on the US dollar in the second half and early 2025.”

The only caveat to all this is that the resurgence of political violence could increase concerns about instability in the United States and push buyers into haven assets, potentially eroding one of the market’s key positions. Which has already become a playground. Election.

Time life agreements on 10-year Treasury notes due for September showed declines in early Asia trade US executive bonds typically rally when investors look for temporary coverage, leading to Trump’s treasury market deal. may be distorted, depending on bets that the post curve will steepen due to poor performance of long-term bonds on the possibility that Trump’s fiscal and business insurance policies will boost inflationary pressures.

Additionally, some buyers will likely want to hold on to early gains or be wary of entering an already crowded space.

“Political risk is binary and hard to hedge, and uncertainty was high due to the close nature of the race,” said Priya Mishra, portfolio manager at JPMorgan Funding Control.

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“This increases instability. I think that makes a Republican sweep more likely,” he said, “which could put a huge pressure on the curve.”

Equity buyers are bracing for volatility, at least in the near term, when S&P 500 futures begin trading at 6 p.m. ET on Fresh York.

In most cases time buyers do not expect the stock-market trajectory to be derailed following the Trump assassination, with near-term price fluctuations most likely. The market is already battling speculation that valuations are too inflated given the risks posed by the rise in artificial-intelligence stocks and rising interest rates and political skepticism.

However investors are also hoping that store, health-care and oil-industry stocks will enjoy a Trump victory.

“The attacks will increase volatility,” said David Mazza, CEO of Roundhill Investments, who predicted that investors might seek temporary safety in defensive stocks such as mega-cap companies. He said it also “adds support for stocks that perform well in a rising yield curve, especially financials.”

The initial reaction mirrors what became clear after the first presidential debate in late June, when Biden’s weak performance was evident as Trump’s electoral odds increased.

The dollar complicated all the way through that tournament, and buyers soon began adopting a heuristic that involved buying shorter-maturity notes and selling longer-term notes—what was called the steepener trade. Is. That business is benefiting, with the 30-year Treasury rising from about 37 basis points before the giveover debate to about 5 basis points under the 2-year.

“If the market thinks Trump’s chances of winning are higher than they were on Friday – we would expect the tail end of the bond market to sell off in a similar manner to what we saw immediately after the debate,” said Michael Purves, CEO and the founder of Talbaccan Capital Advisors wrote in an email.

Time bond buyers were pricing in at least two interest rate discounts in 2024, a big spice in the odds of Trump’s election could prompt the Fed to hold on to reserves longer, according to Purves.

“Trump’s announced policies are (at least for now) more inflationary than Biden’s,” they wrote, “and we think the Fed will want to hoard as much dry energy as possible.”

– Liz Capo McCormick, Isabelle Lee, Sid Verma, Edward Dufner, Isha Dey and Michael G. With the help of Wilson.

(Updated with the start of US inventory futures in Asia, the Mexican peso declined in the 4th paragraph. 10-year US Treasury futures in the 7th paragraph.)

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