Market Report.
📉 China’s markets were mixed, with the Shanghai Composite falling 0.93%. Hong Kong’s Hang Seng index fell 2.79%, retreating for the second day as most sectors declined. Amid weak data and a disappointing stimulus package. The offshore yuan slid past 7.24 per dollar.
💰 Bitcoin has surged over 25% since the election of Donald Trump as U.S. president, reaching the verge of $90,000 on Tuesday. This surge is driven by expectations that a Trump administration will be more crypto-friendly. Trump embraced digital assets during his campaign, promising to make the U.S. the “crypto capital of the planet” and to accumulate a national stockpile of bitcoin. The possibility of Trump’s pro-crypto policies has driven a speculative surge in crypto mining and trading stocks, with companies like Riot Platforms, MARA Holdings, and CleanSpark seeing huge jumps. Crypto investors are also anticipating an end to increased scrutiny under current SEC Chair Gary Gensler, whom Trump has said he will replace. There are also speculations that other nations may buy bitcoin in a bid to “front run the U.S.” if Trump follows through on his crypto-friendly agenda.
🏛️ Decision Desk HQ has projected that Donald Trump’s Republican Party has won a majority in the U.S. House of Representatives, giving them control of both chambers of Congress. Republicans have won at least 215 seats, with Democrats holding at least 206. 14 seats remain uncalled. Republicans have already secured a majority in the U.S. Senate, with at least 52 seats. During Trump’s first term from 2017-2021, when Republicans controlled both chambers, his biggest legislative achievement was the sweeping tax cuts that are set to expire next year.
💊 AstraZeneca’s results are in focus as investors await comments on issues in China. Last week, the company revealed its China President, Leon Wang, was detained by authorities, though it doesn’t believe it’s linked to a health insurance fraud case involving the company.
🇨🇳 China may respond to a second Trump presidency with the following measures: Greater fiscal and monetary stimulus to boost domestic demand and manufacturing. Allowing the yuan to weaken to make Chinese exports more competitive. Targeting U.S. agricultural products with retaliatory tariffs, especially soybeans, beef, and corn. Restricting exports of rare earths and electric vehicle batteries to retaliate against U.S. tariffs. Increasing investment in overseas production bases to avoid U.S. tariffs and buffer against trade shocks. These measures could limit the impact on China’s GDP growth to less than 1 percentage point per year on average over Trump’s second term. However, some warn that China’s efforts to boost exports to other markets could spark backlash and lead to an escalated, multi-front trade war.
📩 The US Department of Commerce sent a letter to TSMC imposing these export restrictions, which come just weeks after TSMC notified the Commerce Department that one of its chips had been found in a Huawei AI processor. The move is aimed at preventing Huawei, which is on a US restricted trade list, from accessing advanced chips that could help its AI efforts. The drastic measure also affects many more Chinese companies besides Huawei. The US has been late in updating rules on technology exports to China, and new proposed regulations have yet to be published.
🗣️ Yesterday, Kashkari said that if companies lose employees to deportations, there would be some disruption, but the full impact is unclear. He said it will be up to business, Congress and the executive to adjust to this. On inflation and monetary policy, another rate cut is expected in December. Trump’s policies, such as tariffs and tax cuts, could affect inflation. Remember, tariffs will make imported goods more expensive. The tax cut, however, should contain inflation.
📈 Market View:
🚗 Tesla continues to soar like a rocket, boosted by Trump’s victory and Musk’s involvement in the administration. Yesterday, it surpassed $357 per share, reaching almost 50% up since the election, which is insane. However, possible restrictions on electric vehicle subsidies from the Trump administration could work against the company.
📉 Mini S&P 500 futures remain strong, but appear to have peaked at 6050 points, currently trading at 6024, retreating slightly. The Nasdaq 100 is also slightly above 21300 points and is currently down to 21205.
💵 The dollar index continues its gains, rising above 105 points and is currently trading at 105.70 points, dragging down the EUR/USD, which has lost 1.07 points and is currently trading at 1.0635. European markets open lower with sharp declines. DAX 40 futures are currently down by more than 0.80%, trading at 19360 points. The EuroStoxx 50 follows the same trajectory, falling to 4815 points, levels close to September’s falls.
🛢️ Crude oil has fallen almost 6% from last week’s highs, with Brent crude currently trading at 71.70 dollars a barrel. The reasons could be the lack of determination of China’s stimulus announcements, which portend less industrial activity in the absence of stimulus. As the dollar rallies, gold continues to cool, falling to $2,215 an ounce. Bitcoin rallies, surpassing yesterday’s $82000 and reaching $90000.
🌍 Geopolitics:
📞 According to Bloomberg, Kremlin sources claim that the information published by the Washington Post about Trump and Putin’s talks are not true. No phone call between the two has yet taken place.
🇮🇱 Israeli Minister of Strategic Affairs Ron Dermer met with U.S. President-elect Donald Trump at Mar-a-Lago on Sunday. The meeting preceded Dermer’s meeting with U.S. Secretary of State Antony Blinken on Monday. Dermer briefed Trump on Israel’s plans for Gaza, Lebanon, and Iran over the next two months before Trump takes office. Some analysts believe the incoming Biden administration may no longer have enough leverage to broker ceasefires between Israel and its foes, after Trump’s election victory.
🇺🇦 As Donald Trump’s election win raises the prospect of talks to end the Russia-Ukraine war, Ukraine is battling to put itself in the strongest position for any negotiations: Ukraine sees the next 4-5 months as a critical period to define its negotiating positions before potential talks. Ukraine is waiting to see who Trump appoints to key security and defense roles to gauge how he will shape Ukraine policy. Trump has ruled out Trump-era officials seen as pro-Ukraine. Ukraine’s president Zelenskyy is skeptical that a “rapid” end to the war proposed by Trump would not require major concessions from Ukraine. There is a bleak mood in Ukraine, with doubts that the Biden administration will significantly increase support before leaving office.
