Markets swing on nomination of Besset, tariff announcements

Financial markets responded positively to US President-elect Donald Trump nominating Scott Bessent as Treasury Secretary. Bessent is perceived as being pro markets, having spent a career in fund management, and supportive of Trump’s deregulatory and tax cut agenda while he has been more measured in his comments of across-the-board tariffs. US treasuries closed higher as markets discount some of the more alarmist policies on trade while equities closed stronger. Peer currencies to the US dollar also pushed higher in a relief rally.

President-elect Trump has prepared an executive order to impose additional tariffs of 10% on goods from China and 25% on all goods from Mexico and Canada, linking the trade restrictions to stopping flows of migrants over the US border and to halting flows of illegal narcotics. Both Canada and Mexico are major exporters to the US of energy, cars and other consumer goods along with supply-chain integration in multiple industries.

Today’s Economic Data and Events

19:00 US New home sales Oct: forecast 725k

19:00 US Conf. Board consumer confidence Nov: forecast 111.4

23:00 US FOMC meeting minutes Nov 7

Fixed Income

• Treasury markets opened the week on a stronger footing in response to President-elect Donald Trump naming Scott Bessent as his nominee for Treasury secretary. Yields on the 2yr UST fell 10bps to 4.2685% while the 10yr yield fell almost 13bps to 4.2731%. The 2s10s curve has inverted again, falling just under neutral for the first time since September.
• Markets have slightly increased their expectation for the December FOMC meeting to about a 56% probability of another 25bps cut.
• Bond markets had a positive day in general to start the week as there was a rally across multiple assets.

FX

• Currency markets swung against the dollar overnight with a relief rally on the nomination of Scott Bessent as Treasury secretary. EURUSD rose by 0.7% to 1.0495, its strongest single-day gain since early August. USDJPY dropped by 0.4% to 154.23, a relatively modest move, while GBPUSD added 0.3% to 1.2568. Much of those moves have been unwound in early trade today, however, as markets respond to news that Donald Trump is seeking to impose additional tariffs on China as well as on Mexico and Canada.
• Commodity currencies were more muted in their response overnight and have moved lower in early trading today. USDCAD is up by more than 1% in response to the news that Canada could face tariffs of 25%, leading AUD and NZD weaker.

Equities

• US equity markets had a strong close to the start the week with the Dow Jones up 1% while the S&P 500 added 0.3% and the NASDAQ was higher by 0.3%. European markets also closed higher with the Euro Stoxx index up 0.2% and the FTSE 100 adding 0.4%.
• Local markets had a strong start to the week with the DFM up by almost 1% overnight while the ADX added 0.2%. By contrast, the Tadawul dropped by 0.7%.

Commodities

• Oil prices sold off sharply at the start of the week in response to positive signals about a ceasefire between Israel and Lebanon and in response to President-elect naming Scott Bessent as Treasury secretary, a move perceived as positive for oil production in the US. Brent futures fell by 2.9% to USD 73.01/b while WTI was off by more than 3% to USD 68.94/b.
• OPEC+ will hold its ministerial meeting online over the next few days, suggesting the group doesn’t intend for a long negotiation session. Plans from the producers’ alliance are for production cuts to be wound down from January onward though conditions in the oil market remain unfavourable for meaningful production increases.
• Gold slumped more than 3.3% overnight as financial markets rallied and the haven asset lost its allure. Prices are trading around USD 2,630/troy oz. the move in gold was matched by selling across silver, platinum and palladium. Industrial metals fared better, however, with LME aluminium up 1% and copper adding about 0.9%. Iron ore futures rose by 0.5%.