Bets on 'Trump 2.0' fuel surge in US stocks and dollar, Treasuries slide
Dollar gains most in four years
Euro set for biggest drop since 2016
Mexican peso drops
Bitcoin roars to record
US stocks surge, big gains in small caps
Adds comments in 6th and 13th paragraphs, updates prices throughout
By Amanda Cooper and Lewis Krauskopf
LONDON/NEW YORK, Nov 6 (Reuters) -Donald Trump's victory in the U.S. presidential election unleashedthe biggest one-day rally in the dollar in four years, fueled rallies in U.S. stocks and punished bond prices as expectations of tax cuts and tariffson imports drove optimism about economic growth along with worries about inflation.
U.S. equity indexesopened sharply higher, with the benchmark S&P 500 jumping 2% to a record high and huge gains in areas such as small cap stocks and regional banks that are poised to benefit from Trump's expected lighter regulatory touch.
Thedollar was set for its largest one-day jump since 2020.Bitcoin hit record highs and Treasuries were battered.
Trump's pledges to raise tariffs, cut taxes and slash regulations encouraged investors to dive into a range of assets that looked likely to benefit from such policies.
Markets that could suffer under tougher tariffs, including those in some of major U.S, trading partners, bore the brunt of the sell-off. The Mexican peso MXN= slumped toits lowest in over two years while the euro EUR=EBS was set for its largest dailydrop since the Brexit vote in 2016.
"Everywhere you look, there's the thumb prints of these election results for markets," said Paul Christopher, head of global investment strategy at the Wells Fargo Investment Institute.
Bolstering confidence in so-called "Trump trades,"Republicans woncontrol of the U.S. Senate. Investors were still awaiting results in the House of Representatives to see if Republicans could pull off a "Red Sweep" that would give them control of both houses of Congress, further easing the path for Trump's agenda.
The election could have far-reaching implications for tax and trade policy, as well as U.S. institutions. The outcome affects assets globally and could determine the outlook for U.S. debt, the longer-term strengthof the dollar and a host of industries that make up the backbone of corporate America.
INTEREST RATES SEEN HIGHER
"The consequence is a higher path of rates," said Nick Ferres, chief investment officer at Vantage Point Asset Management in Singapore. He was buying bank shares in anticipation that higher yields and stronger growth would benefit their earnings.
Investors sold U.S. Treasuries, partly on the expectation that higher tariffs would inevitably filter through to consumer prices, but also because Trump's promises on spending could boostgovernment debt levels. The benchmark 10-year Treasury yield US10YT=RR rose to 4.48%, its highest level in over four months.
"If he's able to fully implement his agenda, it means bigger deficits, bigger tax cuts, and also, because of tariffs, higher inflation," said David Kelly, chief global strategist at JPMorgan Asset Management. "The higher inflation and the bigger deficits should push up long-term interest rates."
In stocks, shares in Trump Media and Technology Group DJT.O surged over 20%, while those in Tesla TSLA.O, headed by Trump supporter Elon Musk, jumped 14%. The small-cap Russell 2000 .RUT rose 4%.
Bitcoin surged to a record high, betting on a softer line on cryptocurrency regulation.
"With Trump's victory, you'll get much stronger fiscal policies compared to what might have been under a Democratic administration. This will have repercussions for inflation, and you can see that already with this morning's rise in Treasury yields," Andrea Scauri, a Swiss-based senior portfolio manager at Lemanik, said.
"So, who benefits from all of this? I think old-economy sectors, like oil, drilling, mechanical, and heavy industry, will benefit. And probably also tech, as the American consumers will have more money in their pockets, they might spend it on new phones, TVs, or invest in the stock market."
The results meant marketshad gained clarity about the presidency fasterthan in 2020, when Joe Biden was announced the victor some four days after election night.
"That's what markets have been most worried about, that there would be a long, drawn-out fight over who won," said Jamie Cox, managing partner at Harris Financial Group.
Emerging currencies stumble over Trump win https://reut.rs/40zyyiE
Bitcoin jumps on Trump's potential victory https://reut.rs/3Yz9q8V
Investors position for a Trump win https://reut.rs/3CfrDB3
Additional reporting by Lewis Krauskopf, Suzanne McGee, Michelle Conlin, Nupur Anand, Chibuike Oguh, Noel Randwich, Saqib Ahmed, Saeed Azhar, Caroline Valetkevitch, Tom Westbrook, Kevin Buckland, Megan Davies, Douglas Gillison, Carolina Mandl, Lananh Nguyen, Danilo Masoni, Sinead Cruise and Alex Cornwell; Writing by Michelle Price and Amanda Cooper; Graphics by Pasit Kongkunakornkul, Vineet Sachdev and Sumanta Sen; Editing by Paritosh Bansal, Sam Holmes, Peter Graff, Sharon Singleton and David Gregorio
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