Donald Trump's straight talk fires up global markets
MUMBAI: The dynamics of the world markets have changed substantially since Donald Trump staged a surprise victory in the US election on November 8.
In the equity market segment, Trump's victory has brought back the US and other developed markets into the spotlight. US indices have hit record highs, with the Dow Jones gaining 12%. Trump's promises to increase spending on public works and cut taxes have elated the Wall Street, taking the dollar higher. The US 10-year bond yield has moved up to 2.5% from 1.8%. European markets have gained 6-12%.
Emerging markets have lost some sheen since his victory, with MSCI EM index up just 4.4% compared to the MSCI Developed Market Index's rise of 8.4%. Indian markets, which were hit by a double blow of Trump win and demonetisation in November, have un der perfor med within EMs, gaining 2.7%.
Not surprisingly, Trump's policies and prospects of more interest rate hikes in the US have bolstered the dollar, with the Dollar Index -a measure of the strength in the greenback against six major currencies -gaining about 3%.
“Trump's policies in terms of higher fiscal spending is positive for US markets and negative for bonds.This has led to a dollar rally as well,“ said Piyush Garg, CIO, ICICI Securities. If one takes a one-year view, this trend should continue unless there is a difference between what Trump has proposed and what he does going ahead, said Garg.
Emerging market currencies have mostly weakened versus the dollar during the period by up to 10%, with the Mexican peso taking the worst hit.
Through his proposed policies, Trump has blamed Mexico for immigrant problems and loss of US jobs, which has pulled the South American country's currency sharply down. Trump's stimulus plan has boosted fortunes of commodities as well, prices of metals have risen 9-15%, while crude oil prices have jumped 22%.
The dollar strength, however, has not boded well for the yellow metal, with gold prices falling nearly 3% between November 8 and now.
In the equity market segment, Trump's victory has brought back the US and other developed markets into the spotlight. US indices have hit record highs, with the Dow Jones gaining 12%. Trump's promises to increase spending on public works and cut taxes have elated the Wall Street, taking the dollar higher. The US 10-year bond yield has moved up to 2.5% from 1.8%. European markets have gained 6-12%.
Emerging markets have lost some sheen since his victory, with MSCI EM index up just 4.4% compared to the MSCI Developed Market Index's rise of 8.4%. Indian markets, which were hit by a double blow of Trump win and demonetisation in November, have un der perfor med within EMs, gaining 2.7%.
Not surprisingly, Trump's policies and prospects of more interest rate hikes in the US have bolstered the dollar, with the Dollar Index -a measure of the strength in the greenback against six major currencies -gaining about 3%.
“Trump's policies in terms of higher fiscal spending is positive for US markets and negative for bonds.This has led to a dollar rally as well,“ said Piyush Garg, CIO, ICICI Securities. If one takes a one-year view, this trend should continue unless there is a difference between what Trump has proposed and what he does going ahead, said Garg.
Emerging market currencies have mostly weakened versus the dollar during the period by up to 10%, with the Mexican peso taking the worst hit.
Through his proposed policies, Trump has blamed Mexico for immigrant problems and loss of US jobs, which has pulled the South American country's currency sharply down. Trump's stimulus plan has boosted fortunes of commodities as well, prices of metals have risen 9-15%, while crude oil prices have jumped 22%.
The dollar strength, however, has not boded well for the yellow metal, with gold prices falling nearly 3% between November 8 and now.
