Stocks, Bonds Rise as Traders Cheer Treasury Pick: Markets Wrap

(Bloomberg) — Stocks and Treasuries rose as traders welcomed Donald Trump’s pick of Scott Bessent for Treasury Secretary as a measured choice that would inject more stability into the US economy and financial markets.

Europe’s Stoxx 600 index climbed 0.3%, with stronger gains in US equity futures. That continued an upbeat tone from Asia. Meanwhile, the yield on 10-year Treasuries dropped six basis points to 4.34%. The dollar declined while Bitcoin rebounded from a weekend drop.

The market moves mark a reversal of some elements that define the so-called Trump Trade, including a surging dollar and rallying Bitcoin. The cooling enthusiasm about these assets comes as traders trim expectations for the president-elect to lower taxes and boosts tariffs, policies that may keep interest rates elevated and support the greenback.

Bessent, who runs macro hedge fund Key Square Group, has indicated he’ll back Trump’s tariff and tax cut plans but investors expect him to prioritize economic and market stability over scoring political points. The nomination has eased concerns over the incoming president’s protectionist policies, which had threatened to stoke inflation, worsen trade tensions and amplify market volatility.

“We have the Trump reflationary agenda with obviously maybe someone in charge of the economy at the Treasury who is probably more gradualist,” Vincent Juvyns, global market strategist at JPMorgan Asset Management, told Bloomberg TV. “US exceptionalism will to some extent remain in place on the economic front but also on the market front.” 

Bloomberg’s dollar index fell by the most in over two weeks. Traders betting on Trump’s fiscal policies — including sweeping trade tariffs and persistent economic growth — had pushed the dollar up for eight straight weeks through Friday.

The euro rose against the greenback, after European Central Bank governing Council member Francois Villeroy de Galhau said ECB policy will develop regardless of what happens at the Federal Reserve.

Corporate dealmaking caught traders’ attention on Monday morning. UniCredit SpA launched a €10 billion ($10.6 billion) all-share offer for domestic rival Banco BPM, opening a second major takeover front as it also pursues Commerzbank AG.

Banco BPM shares surged 8.5%. Commerzbank slumped 7.2%, while UniCredit shares were 2.5% lower.

Meanwhile, Anglo American Plc said it’s agreed to sell its steelmaking coal business to Peabody Energy for a fee that could rise to as much as $3.78 billion, as the miner’s restructuring gathers pace. Anglo American shares gained in London.

ITV Plc shares rallied as much as 9.5%, the most since March, following a Sky News report that the company is drawing interest from potential buyers.

Looking ahead to prospects for US equities, RBC Capital Markets strategist Lori Calvasina tipped the S&P 500 to reach the 6,600 level by the end of 2025, an advance of about 11%. While stocks are vulnerable to a drawdown in the shorter term after the index’s 25% rally so far in 2024, they are likely to benefit from another year of solid economic and earnings growth, some political tailwinds, and additional relief on inflation, the RBC team said. 

Japan, US Data

Oil dropped as Israel said it’s potentially days away from a cease-fire deal with Lebanon’s Hezbollah. Gold also fell after jumping the most in 20 months last week.

This week, traders in Asia will be closely monitoring Japan’s inflation data after Bank of Japan Governor Kazuo Ueda last week indicated the December policy meeting is live. The Reserve Bank of New Zealand is expected to cut its key rate on Wednesday. 

Elsewhere, a swath of inflation and growth readings in Europe are due. Traders will closely parse the Federal Reserve’s November meeting minutes, consumer confidence and personal consumption expenditure data to help assess the outlook for rate cuts next year.

Key events this week:

• BOE Deputy Governor Clare Lombardelli and rate-setter Swati Dhingra speak, Monday
• ECB chief economist Philip Lane and Governing Council Member Gabriel Makhlouf speak, Monday
• Riksbank Deputy Governor Anna Seim speaks, Tuesday
• US FOMC minutes, new home sales, US Conference Board consumer confidence, Tuesday
• Bank of Canada Deputy Governor Rhys Mendes speaks, Tuesday
• China industrial profits, Wednesday
• New Zealand rate decision, Wednesday
• US PCE, initial jobless claims, GDP, durable goods, Wednesday
• Bank of Australia Governor Michelle Bullock speaks, Thursday
• South Korea rate decision, Thursday
• Eurozone economic confidence, consumer confidence, Thursday
• Japan unemployment, Tokyo CPI, industrial production, retail sales, Friday
• Eurozone CPI, Friday
• Bank of England issues financial stability review and policy committee minutes, Friday
• Canada GDP, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 0.3% as of 8:30 a.m. London time
• S&P 500 futures rose 0.4%
• Nasdaq 100 futures rose 0.4%
• Futures on the Dow Jones Industrial Average rose 0.6%
• The MSCI Asia Pacific Index rose 0.7%
• The MSCI Emerging Markets Index rose 0.5%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro rose 0.3% to $1.0454
• The Japanese yen rose 0.1% to 154.57 per dollar
• The offshore yuan was little changed at 7.2554 per dollar
• The British pound rose 0.2% to $1.2558

Cryptocurrencies

• Bitcoin rose 1.3% to $98,336.37
• Ether rose 1.9% to $3,409.04

Bonds

• The yield on 10-year Treasuries declined six basis points to 4.34%
• Germany’s 10-year yield declined two basis points to 2.22%
• Britain’s 10-year yield declined three basis points to 4.36%

Commodities

• Brent crude fell 0.9% to $74.53 a barrel
• Spot gold fell 1.7% to $2,669.52 an ounce

This story was produced with the assistance of Bloomberg Automation.

©2024 Bloomberg L.P.