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Take Five: Bracing for 'Trump 2.0'

Published 2024-11-11, 02:30 a/m
© Reuters. FILE PHOTO: Republican presidential nominee and former U.S. President Donald Trump takes the stage to address supporters at his rally, at the Palm Beach County Convention Center in West Palm Beach, Florida, U.S., November 6, 2024. REUTERS/Brian Snyder/Fil
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(Reuters) -Donald Trump's sweep to victory in the U.S. presidential election has ignited the so-called "Trump trade", with the dollar, crypto and U.S. stocks all surging, as investors assess the global implications of his return to power.

Germany is grappling with a political crisis, Britain's finance minister delivers a key speech and policymakers head to Baku for a climate summit.

Here's a look at the week-ahead for markets from Kevin Buckland in Tokyo, Lewis (JO:LEWJ) Krauskopf in New York, Sinead Cruise, Dhara Ranasinghe and Karin Strohecker in London.

1/ WATCHING THE USA

    Focus turns to U.S. inflation data on Nov. 13, as markets wait to see if President-elect Trump will push ahead with economic policies that could be inflationary.

    Economists expect the consumer price index to have climbed 0.2% for October. September's 2.4% annual increase was the smallest in more than 3-1/2 years, reinforcing Federal Reserve rate-cut bets.

    But the central bank may have been thrown a curveball with Trump's election, since the Republican's plans to raise tariffs could fuel price rises. Following the Fed's 25 bps rate cut on Thursday, Chair Jerome Powell gave little guidance on how fast and far rates will now fall.

Markets are also watching whether "Trump trades" - including a stronger dollar and buying shares of banks and small-cap companies - will continue as investors assess the impact of the election result.

2/ OVER IN BEIJING

A closely watched gathering of China's top legislative body wrapped up on Friday with the announcement of a 6 trillion yuan ($835 billion) spending package aimed at cleaning up off-the-book debt at local governments.

For investors who had been hoping for extra spending to counter the potential impact of a Trump-led trade war, that was a massive let-down. Hong Kong-traded mainland property shares tumbled as much as 4.6% on Monday (NASDAQ:MNDY). The yuan fell, and commodities from crude to copper sold off.

Some analysts had warned it would be too early for Beijing to formalise a strategy only days after Trump's election victory. Macquarie, for one, said the goal of the stimulus is achieving the around-5% growth target for 2024, and "not to reflate the economy in any meaningful way".

With Trump's threatened 60% tariffs dwarfing those from eight years ago, meeting that growth target may be the least of Beijing concerns.

3/ POLITIK CHAOS

A collapse in Germany's ruling coalition puts a crisis in Europe's biggest economy in the spotlight just after Trump's win.

Chancellor Olaf Scholz's decision to fire his finance minister, from coalition partner the Free Democrats, points to a vote of no confidence in January and possible snap elections in March.

Scholz's Social Democrats now rule with remaining coalition ally the Greens in a minority government but face pressure to hold a no-confidence vote sooner. A contentious draft budget also needs to be finalised.

The timing is unfortunate. Germany has just dodged recession after a series of setbacks, while higher tariffs may loom under Trump.

Uncertainty could hurt business investment and slow M&A. As an election-packed year globally winds down, Germany could be gearing up to hold a poll of its own.

4/ COP-ING MECHANISMS

Policymakers and climate activists head to Azerbaijan's capital Baku from Nov. 11 for the 29th annual United Nations Climate Summit, known as COP29.

The summit has been dubbed the "climate finance COP" for its central goal: to agree on how much money should go each year to helping developing countries cope with climate-related costs.

Governments are also eager to resolve rules for trading carbon credits earned through the preservation of forests and other natural carbon sinks.

But coming just days after the U.S. elections and amid rising geopolitical tensions, the meeting is expected to be a subdued affair. Trump, a climate denier, wants to ramp up fossil fuel production and pull out of the Paris Climate Accords, a framework for reducing global greenhouse gas emissions.

5/ PENSION POTS

UK finance minister Rachel Reeves will serve up her latest plans to reinvigorate Britain's sluggish capital markets in her first Mansion House speech on Thursday, with a slew of pension fund reforms topping industry wish-lists.

© Reuters. FILE PHOTO: Republican presidential nominee and former U.S. President Donald Trump takes the stage to address supporters at his rally, at the Palm Beach County Convention Center in West Palm Beach, Florida, U.S., November 6, 2024. REUTERS/Brian Snyder/File Photo

UK defined benefit retirement schemes, most of which are closed to new members, are collectively sitting on an estimated 300 billion pounds of cash that could be funnelled into housing, infrastructure, unlisted company investments and unloved stocks for the greater good of the UK economy, industry sources say.

But while change is broadly welcome, the idea of mandating pension fund investment in so-called UK productive finance has been criticised because of the risk that good intentions may not always lead to good outcomes for retirement savers, particularly as UK equities continue to perform poorly against global peers.

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