European equities saw modest gains alongside US equity futures, while the US dollar weakened on the eve of Donald Trump’s inauguration. Bitcoin surged to a new record high, reflecting the growing volatility in markets as the incoming president is poised to enact a sweeping range of executive actions upon taking office.
Trump is expected to sign numerous executive orders on his first day in office, targeting key areas such as immigration, tariffs, and energy policies. His aggressive approach aims to rapidly implement his policy agenda, a move many investors anticipate will be favorable for businesses, but will also add an element of unpredictability to the economic landscape.
“Trump is laser-focused on maintaining a positive sentiment in the US stock markets,” said Dana Malas, strategist at SEB. “His policies will likely be growth-oriented with inflationary effects, but expect some sharp market moves, driven by a philosophy that agreements are meant to be broken.”
Even before he officially takes office, Trump’s influence is already evident in market movements. His positive remarks following a conversation with Chinese President Xi Jinping gave Asian stocks a boost on Monday. Additionally, Bitcoin saw a sharp 5.5% increase after the Trump family introduced their own meme-inspired cryptocurrency over the weekend.
At the open, the Stoxx Europe 600 index gained around 0.1%, led by technology stocks, while US futures for the S&P 500 and Nasdaq 100 recorded modest upticks. Wall Street was closed for a holiday on Monday. The dollar weakened slightly, ending its three-day rally, but remained close to its 13-month peak.
A key focus of Trump’s initial actions is likely to involve invoking emergency powers to accelerate domestic energy production and undo many of President Biden’s climate-related measures, sources say. Despite this, crude oil prices held steady, though energy stocks in Europe dipped.
Trump’s pro-growth and protectionist policies have already spurred predictions of a more hawkish Federal Reserve, a stronger dollar, and a potentially weaker bond market. Nomura Holdings and T. Rowe Price have forecast a rise in 10-year Treasury yields to as much as 6% this year, while a minority of bond traders believe the Federal Reserve’s next move will be to raise interest rates, contrary to the prevailing view that rates will be cut.
The positive sentiment in Asian markets was further bolstered by the trade discussions between Trump and Xi Jinping, which touched on issues like trade, TikTok, and fentanyl. This dialogue could shape the tone of US-China relations in the early days of the Trump administration. On Sunday, TikTok also began restoring its service in the US, with Trump stating that enforcement of a law requiring the app’s Chinese owner to sell its US operations would be paused for three months.
The trajectory of these market movements will largely depend on how quickly Trump moves to implement policies, including tax cuts, tariff increases, and stricter immigration controls. These actions, coupled with the inflationary pressures they may trigger, could support a stronger dollar and elevated Treasury yields. Furthermore, his stance on issues such as US-China tech rivalry and climate change is expected to influence investment decisions across a wide range of sectors, including semiconductors, electric vehicles, and shipbuilding.
“What drives optimism in Asia is Trump’s own comments about a productive phone call with President Xi,” said Heng Koon How, head of market strategy at United Overseas Bank. “We hope this marks a more cooperative phase in US-China relations.”
In other global developments, Chinese Vice President Han Zheng met with US business magnates such as Elon Musk, underscoring China’s efforts to foster a positive relationship with the US ahead of Trump’s return to office.
The World Economic Forum’s annual meeting also kicked off on Monday in Davos, Switzerland, with prominent billionaires like Larry Fink, Ray Dalio, and Marc Benioff in attendance. Trump is scheduled to address the forum virtually three days after his inauguration.
Looking ahead, the financial world will also focus on the Bank of Japan’s upcoming policy decision on Friday, with a majority of economists surveyed by Bloomberg predicting a rate hike.
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