NEW YORK/LONDON: The US S&P 500 zoomed past 6,000 points on Friday to a new record while Treasury yields retreated, as investors again cheered Donald Trump’s decisive victory, although disappointment about China’s latest fiscal support dampened the mood elsewhere.
A day after the Federal Reserve delivered a quarter-point rate cut, as anticipated, the focus returned to the fallout of Tuesday’s US presidential election and headlines out of Beijing.
The offshore yuan weakened, while US-listed shares of Chinese firms and China exposed-sectors in Europe sank as investors took in news that China’s stimulus did not directly inject money into the struggling economy.
However, investors on Wall Street shrugged off frustration about the lack of a Chinese fiscal bazooka and bought US stocks. The S&P 500 index climbed 0.6% to cross the 6,000-point mark, the Dow Jones Industrial Average climbed 0.8%, and the Nasdaq Composite added 0.2%. The S&P 500 and the Dow are set for their best week in a year.
Shares of electric car maker Tesla, whose chief executive Elon Musk became one of Trump’s biggest supporters in the last leg of his re-election campaign, shot up 10%, catapulting its market capitalisation to US$1 trillion for the first time since 2022.
Nicholas Colas, a co-founder of DataTrek Research LLC, said there are several reasons for buying US stocks: “The Fed is cutting rates, and the US economy is still strong.”
In addition, the Republican party won not only the White House this week, but also control of the Senate, and may win control of the House of Representatives – a similar scenario, Colas said, to the November 2016 election outcome that preceded the S&P 500’s 22% gain in 2017.
Investors are betting that a Trump administration will bring lighter regulation and tax cuts that could boost the US economy.
Outside the US the mood was more subdued. A MSCI index for world stocks was flat, but still close to a record high, while the pan-European STOXX 600 lost 0.7%.
“What you are going to get because of the clean sweep is a mandate to improve the US economy. So, taxes will come down, bureaucracy will ease and regulation will become lighter,” said Guy Miller, chief markets strategist at Zurich Insurance Group.
“Between now and year-end, there is a tailwind for US stocks. The US market has potential,” he said.
Germany’s DAX stock index fell 0.8% a day after posting its best daily performance of 2024 so far, helped by expectations that Germany could scrap its debt brake.
China disappoints
China unveiled a 10 trillion yuan (US$1.40 trillion) debt package to ease local government financing strains and stabilise flagging economic growth.
Finance Minister Lan Fo’an said more stimulus was coming, with some analysts saying Beijing may not want to fire all its financial weapons before Trump takes over officially in January.
Mainland blue chips 1%, a day after rising 3%. Hong Kong’s Hang Seng also slid in a sign of some caution ahead of the announcement.
The offshore Chinese yuan fell 0.7% to 7.2011 per dollar. China-exposed European luxury and mining stocks each fell by more than 3%.
Fed cuts
US Treasury yields fell after Fed Chair Jerome Powell on Thursday signalled continued, patient policy easing.
The Fed’s rate cut followed a quarter-point cut from the Bank of England and a large half-point cut by Sweden, also on Thursday.
Ten-year Treasury yields fell 8.3 basis points to 4.343%, reversing sharp rises following the US election result.
Powell said Tuesday’s election result would have no “near-term” impact on US monetary policy.
“The Fed pointed to a more uncertain economic outlook and inflation remaining elevated,” said Mahmood Pradhan, head of global macroeconomics at the Amundi Investment Institute.
“Together with a likely change in policy direction under the new administration, we expect a more uncertain and measured pace of easing next year.”
The dollar index, which measures the currency against six major peers, rose to 105.04, following a 0.7% drop on Thursday, its biggest since Aug 23. On Wednesday, it soared 1.53%, the most in more than two years, a sign of increased volatility as investors assess the new Trump administration’s policies.
The euro and sterling both fell against the dollar, while the dollar slipped 0.1% to 152.73 yen.
Bitcoin jumped 1.6% to US$77,095, a record high, following a nearly 10% surge this week. Trump has vowed to make the US “the crypto capital of the planet”.
After a roller-coaster week, gold fell 0.8% to US$2,684.99. It slumped more than 3% on Wednesday, but bounced 1.8% overnight. Last week it surged to an all-time high of US$2,790.15.
Brent crude oil futures pared losses during London trade and were last down 2.4% at US$73.80, US West Texas Intermediate crude fell 2.9% to US$70.26.