Trump Victory To Trigger Initial Rally On Wall Street

The major U.S. index futures are currently pointing to a sharply higher open on Wednesday, with stocks likely to extend the rally seen in the previous session.

The substantial upward momentum on Wall Street comes as former President Donald Trump has been declared the winner in the presidential election versus Vice President Kamala Harris.

Claiming victory in several key swing states, Trump is projected to win far more than the 270 Electoral College votes needed to secure his return to the White House.

Trump is seen by the markets as better for corporations and is likely to renew the tax cut package enacted during his first term, which was due to expire at the end of 2025.

A Trump administration is also expected to scale back government regulations and be less hostile to mergers and acquisitions.

However, Trump has also called for increased tariffs on China and other countries, which could lead to renewed inflation concerns.

“A side effect of tariffs and higher prices would be interest rates staying higher for longer, which would be unhelpful for the housing market which, in turn, will act as a drag on home-related categories,” said Neil Saunders, Managing Director of GlobalData.

He added, “While Trump promised lower interest rates, and wants more control over the setting of rates, it is not in his immediate gift to enact this kind of change.”

Republicans are also projected to retake control of the Senate for the first time in four years, although control of the House remains up for grabs.

With the elections now largely in the rearview mirror, traders will turn their attention to the Federal Reserve, which is due to announce its latest monetary policy decision on Thursday.

The Fed is widely expected to lower interest rates by 25 basis points, but the accompanying statement could the impact the outlook for future rate cuts.

Stocks showed a lack of direction over the course of Monday’s session before closing moderately lower but showed a strong move back to the upside during trading on Tuesday. The tech-heavy Nasdaq helped lead the way higher.

The major averages ended the day off their highs of the session but still firmly positive. The Nasdaq surged 259.19 points or 1.4 percent to 18,439.17, the S&P 500 shot up 70.07 points or 1.2 percent to 5,782.76 and the Dow jumped 427.28 points or 1.0 percent to 42,221.88.

The rally on Wall Street may partly have reflected optimism the stock market and the U.S. economy in general will continue to perform well regardless of the results of the elections.

Adding to the positive sentiment about the economy, a report from the Institute for Supply Management showed service sector activity unexpectedly grew at an accelerated rate in the month of October.

The ISM said its services PMI rose to 56.0 in October from 54.9 in September, with a reading above 50 indicating growth. The uptick surprised economists, who had expected the index to dip to 53.8.

With the unexpected increase, the ISM’s services PMI reached its highest level since hitting 56.4 in July 2022.

A separate report released by the Commerce Department showed a significant increase in the size of the U.S. trade deficit in the month of September, as imports surged and exports slumped.

Airline stocks showed a substantial move to the upside on the day, with the NYSE Arca Airline Index soaring by 2.8 percent.

Considerable strength was also visible among housing stocks, as reflected by the 2.3 percent surge by the Philadelphia Housing Sector Index.

Biotechnology stocks also saw considerable strength, driving the NYSE Arca Biotechnology Index up by 1.6 percent to its best closing level in well over three years.

Brokerage, computer hardware and semiconductor stocks also showed significant moves to the upside, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are plunging $1.92 to $70.07 a barrel after climbing $0.52 to $71.99 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $2,688.70, down $61 compared to the previous session’s close of $2,749.70. On Tuesday, gold inched up $3.50.

On the currency front, the U.S. dollar is trading at 154.15 yen compared to the 151.62 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0710 compared to yesterday’s $1.0930.

Asia

Asian stocks ended mixed on Wednesday, while the dollar and bond yields edged up as U.S. Republican candidate Donald Trump won two crucial swing states, North Carolina and Georgia, and tightened his hold on key battlegrounds in the race for the White House.

While Japanese markets rallied on the back of a weaker yen, Hong Kong shares led losses on concerns that Trump’s tariff plans could reignite U.S.-China trade tensions.

Gold prices were down nearly 1 percent in Asian trading on dollar strength, while oil prices fell more than 1 percent after industry data showed a jump in U.S. crude stockpiles.

China’s Shanghai Composite Index fluctuated before finishing marginally lower at 3,383.81 after the head of the People’s Bank of China said in a closely watched meeting that the central bank intends to “increase the intensity of counter-cyclical monetary policy.”

The meeting of the National People’s Congress Standing Committee, which wraps up Friday, is widely expected to approve additional stimulus measures.

Hong Kong’s Hang Seng Index tumbled 2.2 percent to 20,538.38 on concerns over Trump’s more protectionist policies.

Japanese shares logged strong gains as the U.S. dollar rose sharply to hit a three-month high in the lower 154-yen zone, boosting export-related stocks.

The Nikkei 225 Index jumped 2.6 percent to 39,480.67 after briefly spiking over 3 percent. The broader Topix Index closed 1.9 percent higher at 2,715.92.

Lender Mitsubishi UFJ Financial Group soared 5.7 percent and Sumitomo Mitsui Financial Group surged 6.9 percent amid expectations of higher bond yields under Trump.

Semiconductor-linked shares such as Advantest and Tokyo Electron shot up 8.2 percent and 2.3 percent, respectively.

Seoul stocks ended lower as bond yields jumped on bets that Donald Trump would win the U.S. presidential election. The Kospi dropped 0.5 percent to 2,563.51.

Australian markets rose notably in a widespread rally led by banks and technology stocks. WiseTech Global, Commonwealth Bank, Westpac, NAB and Xero rose 1-2 percent.

The benchmark S&P/ASX 200 Index climbed 0.8 percent to 8,199.50, while the broader All Ordinaries Index closed 0.8 percent higher at 8,456.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 index finished marginally lower at 12,649.17 after a choppy session as data showed the country’s jobless rate rose less than forecast in the third quarter.

Europe

European stocks have moved mostly higher on Wednesday as former U.S. President Donald Trump has been declared the winner in the U.S. presidential election after winning several key swing states.

Speaking to his supporters earlier today, Trump expressed that this moment would “help this country heal.”

Investors also cheered the results of a survey that showed Eurozone business activity held steady last month, a small improvement from September’s modest decline.

A separate report revealed Germany’s factory orders rebounded in September on strong growth in aircraft and other transport equipment orders.

Factory orders advanced 4.2 percent on a monthly basis in September, in contrast to the revised 5.4 percent decline in August, Destatis reported.

While the German DAX Index has risen by 0.3 percent, the French CAC 40 Index and the U.K.’s FTSE 100 Index are both up by 0.8 percent.

Shares of Lancashire Holdings have moved sharply higher in London. The British specialty insurance and reinsurance group has reported a 9 percent year-on-year increase in GWP to $1.7 billion for the first nine months of 2024.

Lloyd’s of London insurer Beazley has also rallied after reiterating its full-year undiscounted combined ratio guidance of around 80 percent.

Prudential has also surged after it posted an 11 percent increased in new business profit for the first nine months of fiscal 2024.

Retail giant Marks and Spencer has also shown a substantial move to the upside after beating first-half profit expectations.

Siemens Healthineers has also spiked after the German medical technology company reported revenue growth and full year adjusted earnings before interest and taxes (EBIT) in line with estimates.

Meanwhhle, homebuilder Persimmon has slumped as it flagged concerns around signs of build costs emerging in price negotiations for 2025.

French lender Credit Agricole has also tumbled after reporting mixed third quarter results as weakness at some of its retail businesses overshadowed record revenues at its investment banking unit.

Evotec SE, a pharmaceutical drug discovery and development company, has also plunged after reporting declines in revenues and profits in the first nine months of the year.

Sports brand PUMA has also moved sharply lower after its third quarter sales came in below expectations.

Automaker BMW has also shown a notable move to the downside after reporting a 61 percent drop in its third quarter profit.

U.S. Economic News

The Energy Information Administration is due to release its report on oil inventories in the week ended November 1st at 10:30 am ET.

Crude oil inventories to expected to increased by 1.8 million barrels after edging down by 0.5 million barrels in the previous week.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month’s auction of $25 billion worth of thirty-year bonds.