07 November 2024
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Donald Trump scores a decisive victory in the US election

Daily Outlook 7 November 2024

By Jeanne Walters

Donald Trump has won the 2024 US presidential election, easily surpassing the 270 electoral college votes needed to secure victory. The election was a strong showing for Republicans who are due to take control of the Senate and are currently ahead in the race for control of the House of Representatives. A clear Republican government will ease the pathway for many of the party’s election policies. Key amongst which is the use of tariffs, with Trump having pledged universal tariffs of 10-20% across all trading partners and much higher levels (of as much as 60%) on imports of Chinese goods. Additionally, a Republican Congress and President will likely align on making permanent the tax cuts introduced during the first Trump term, as well as reducing the corporate tax rate, particularly for companies that produce goods in the US.

German factory orders rose sharply in September, jumping 4.2% m/m, after falling 5.8% the month prior. The rebound was significantly stronger than consensus expectations for a 1.6% m/m gain. While the rise in September bodes well for Q3 manufacturing output, the figure was flattered by a material rise in aircraft orders, with activity in the remainder of the year likely to remain more subdued.

Australia has become the latest country to sign a Comprehensive Economic Partnership Agreement (CEPA) with the UAE. The agreement, once ratified, will mark the first free trade agreement Australia has concluded with a MENA region country. Bilateral non-oil trade between the two nations reached USD 2.3bn in the first half of 2024.

Egypt’s net international reserves rose to USD 46.9bn in October, up from 46.7bn the previous month. This marks a new record high and is up from just USD 35.3bn at the start of the year, while the net foreign assets position at commercial banks has also vastly improved. The uptick in support from key partners and international organisations since February has hugely enhanced Egypt’s external liquidity outlook, with investment inflows from the UAE’s Ras el-Hikma investment, renewed support from the IMF, and an uptick in foreign portfolio investment counteracting reduced income from Suez Canal revenues.

Today’s Economic Data and Events

  • 16:00 UK bank rate. Forecast: 4.75%
  • 17:30 US initial jobless claims (w/e Nov 2). Forecast: 223k
  • 23:00 US Fed funds rate. Forecast: 4.75%

Fixed Income

  • US treasury yields rose sharply on Wednesday, driven by market expectations for a higher inflation profile under a Trump administration. The 2yr yield gained 9bps to 4.2617%, while the 10yr yield ended the day 16bps higher to close at 4.4315%.
  • European bond markets were mixed on the day. 10yr UK Gilt yield rose by 3bps to 4.5609%, and the 10yr Bund yield fell 2bps to 2.403%.

FX

  • The dollar saw its sharpest gain in over a year on Wednesday, with the spot index gaining 1.2%. EURUSD fell 1.8% to 1.0729, GBPUSD declined 1.3% to 1.2879 and USDJPY rose almost 2% to 154.63.
  • Commodity currencies also saw sharp falls against the dollar on the day. AUSUSD fell just over 1% to 0.6569, NZDUSD declined by 1.1% to 0.5939, and USDCAD rose 0.8% to 1.3939.

Equities

  • Donald Trump’s win in the US election yesterday, spurred US equity indices to record highs, on expectations of lower taxes and a laxer regulatory environment. The Dow Jones gained 3.57%, the S&P 500 rose 2.5% and the NASDAQ increased by 2.95%.
  • In contrast, European equity markets fell on the day, with concerns about Trump’s proposed tariffs weighing on car manufacturers. The Eurostoxx 50 fell 1.43%, the CAC 40 declined by 0.5%, and the Dax dropped 1.13%. The FTSE 100 was fairly flat, dropping less than 0.1%. Concerns about tariffs also hit Asian markets in early morning trade.
  • Locally, the DFM gained 0.47% and the ADX rose 0.27%.

Commodities

  • Oil prices fell as election results become clear, driven by the strong dollar and news of a 2.15m barrel build in crude inventories last week. Brent futures fell 0.8% to USD 74.92/b, while WTI declined by 0.4% to reach USD 71.69/b.

Written By

Jeanne Walters Senior Economist


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