Published : 4 weeks ago, on 08/11/2024

By Dhara Ranasinghe

LONDON (Reuters) –Global stock markets cruised towards their best week since August on Friday, with sentiment underpinned by Donald Trump’s decisive U.S. election victory, while China kicked off a fresh round of fiscal support for its flagging economy.

A day after the U.S. Federal Reserve delivered a quarter-point rate cut, as anticipated, focus turned back to the fallout of Tuesday’s U.S. election as well as headlines out of Beijing.

The offshore yuan weakened, while U.S.-listed shares of Chinese firms and China exposed-sectors in Europe fell in a sign of investor disappointment with China’s stimulus news.

U.S. stock futures ticked lower,, Europe’s STOXX index eased 0.7%, while Japan’s Nikkei closed 0.3% higher.

The modest moves masked what has been a generally strong week for stocks, led by Wall Street shares, as Trump’s election win stoked expectations of lighter regulation and tax cuts that could further boost the U.S. economy.

The S&P 500 stock index is up over 4% this week and set for its best week in over a year, while MSCI’s world stock index is set for its best week since August with a gain of just over 3% and stands just shy of record highs.

“What you are going to get because of the clean sweep – is a mandate to improve the U.S. economy. So, taxes will come down, bureaucracy will ease and regulation will become lighter,” said Guy Miller, chief markets strategist at Zurich Insurance Group.

“Between now and year-end, there is a tailwind for U.S. stocks. The U.S. market has potential.”

Elsewhere, Germany’s DAX stock index fell a day after posting its best daily performance of 2024 so far, helped by expectations that Germany could scrap its debt brake.

CHINA DISAPPOINTS

China unveiled a 10 trillion yuan ($1.40 trillion) debt package to ease local government financing strains and stabilise flagging economic growth.

Finance Minister Lan Foan said more stimulus was coming, with some analysts saying Beijing may not want to fire all its financial weapons before Trump takes over officially in January.

Mainland blue chips, which rose 3% on Thursday, fell 1% on Friday, as did Hong Kong’s Hang Seng, in a sign of some caution ahead of the announcement.

The offshore Chinese yuan was 0.3% softer at 7.1730 per dollar. China-exposed European luxury and mining stocks each fell over 3%.

“Unless there’s more to come later this evening, today’s fiscal announcement is another disappointment for those expecting substantial stimulus,” said Capital Economics chief Asia economist Mark Williams.

FED CUTS

U.S. Treasury yields were lower after Fed Chair Jerome Powell on Thursday signalled continued, patient policy easing.

Its rate cut followed a quarter-point cut from the Bank of England and a large half-point cut by Sweden also on Thursday.

Ten-year Treasury yields fell 3 basis points to 4.31%, having reversed sharp rises seen following the U.S. election result.

Powell said Tuesday’s election result would have no “near-term” impact on U.S. monetary policy.

The Fed pointed to a more uncertain economic outlook and inflation remaining elevated,” said Mahmood Pradhan, head of global macroeconomics at the Amundi Investment Institute.

“Together with a likely change in policy direction under the new administration, we expect a more uncertain and measured pace of easing next year.”

The dollar index, which measures the currency against six major peers, dipped to 104.36, following a 0.7% drop on Thursday, its biggest since Aug. 23. On Wednesday, it soared 1.53%, the most in over two years, a sign of increased volatility as investors assess the impact of the new Trump administration’s policies.

The euro and sterling were just a touch softer against the dollar, while the dollar slipped almost 0.5% to 152.31 yen.

Bitcoin was a touch firmer just above $76,000, following a nearly 10% surge this week, hitting a record peak of $76,980 on Thursday. Trump has vowed to make the United States “the crypto capital of the planet”.

And after a rollercoaster week, gold fell 0.6% to $2,691. It slumped more than 3% on Wednesday, but bounced 1.8% overnight. Last week it surged to an all-time high of $2,790.15.

Brent crude oil futures trimmed falls during London trade and were last down 1% at $74.86, U.S. West Texas Intermediate crude fell 1.2% to $71.45.

(Reporting by Dhara Ranasinghe in London and Kevin Buckland in Tokyo; Editing by Kevin Liffey and Philippa Fletcher)