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Stock markets and metal prices rally as Trump bounce continues – live updates Stock market Trump bump fades as bond prices fall – business live
(35 minutes later)
2.05pm GMT
14:05
Alan Greenspan, the former head of the Federal Reserve, fears America is entering an era of stagflation -- rising prices, but little real growth.
He’s been speaking on CNBC:
Greenspan repeats his warning of stagflation: inflation will pick up and boost profit margins but that will be a "false dawn" @CNBC
Greenspan also backed Donald Trump over one issue - the regulation of America’s banking sector - saying:
“I’d love to see Dodd-Frank disappear.
Former Fed Chair Greenspan says 'I'd love to see Dodd-Frank disappear' https://t.co/p3WoT0jb5t
1.58pm GMT
13:58
Bond yields surge amid inflation fears
Ouch! A nasty selloff is underway in the government bond market right now.
The price of debt issued by countries such as the US, the UK and Germany is falling sharply, driving up the interest rates (or yield) on the debt.
Investors appear to be betting that Donald Trump’s economic policies will drive up inflation, should he succeed in slashing tax rates and embark on that debt-fuelled programme of rebuilding America’s infrastructure.
As FXTM research analyst Lukman Otunuga puts it:
Pledges of massive U.S fiscal spending have heightened expectations of Trump implementing fiscal stimulus measures, including tax cuts which may bolster profit growth consequently boosting inflation.
So, bond prices are a sea of electronic red ink, as investors are less keen to hold low-yielding government bonds in a world of higher inflation.
Mr Bond is in serious trouble pic.twitter.com/HxtLKDgkfd
Lower bond prices shows that governments must pay more to service their national debts.
Longer-dated debt is also weakening:
Most scary chart for bond investors: Price of 30y German bonds have plunged by 14% since summer 2016. pic.twitter.com/v0XMgXQOPs
We should remember that bond yields have been driven down to record low levels in recent years, as central banks have hoovered them up through their quantitative easing schemes.
So a return to normal levels wouldn’t be a disaster.
Except....a hefty bond selloff would suggest alarm in the markets, and inflict losses on those who have bought at the elevated levels recently.
And that may explain why the FTSE 100 is now negative, and other European markets are lower as this morning’s Trump Bump threatens to fizzle out.
1.24pm GMT1.24pm GMT
13:2413:24
Why the markets should be cautious about TrumpWhy the markets should be cautious about Trump
Investors may be taking a big risk by deciding that Donald Trump will become a new man once he crosses the seal in the Oval Office carpet.Investors may be taking a big risk by deciding that Donald Trump will become a new man once he crosses the seal in the Oval Office carpet.
The ‘Trump bump’ has been based on a somewhat breezy assumption that the new president will successfully implement the debt-fuelled infrastructure programme that many experts support, while ignoring the chance that we actually enter an era of painful protectionism and trade wars.The ‘Trump bump’ has been based on a somewhat breezy assumption that the new president will successfully implement the debt-fuelled infrastructure programme that many experts support, while ignoring the chance that we actually enter an era of painful protectionism and trade wars.
Duncan Weldon, head of research at Resolution Group in London, has just published a ‘must-read’ blog piece, analysing the impact of Trump.Duncan Weldon, head of research at Resolution Group in London, has just published a ‘must-read’ blog piece, analysing the impact of Trump.
Here’s a flavour:Here’s a flavour:
The markets seem to have decided that [aggressive deficit-financed state spending] will indeed now happen — stocks up, commodities up, bonds down. Indeed, the markets seem to have decided that President Trump will be a relatively normal President, even if candidate Trump was a deeply unusual candidate. I’m not so sure.The markets seem to have decided that [aggressive deficit-financed state spending] will indeed now happen — stocks up, commodities up, bonds down. Indeed, the markets seem to have decided that President Trump will be a relatively normal President, even if candidate Trump was a deeply unusual candidate. I’m not so sure.
To adapt a a phrase: “demagogues can stay irrational longer than you can stay solvent”.To adapt a a phrase: “demagogues can stay irrational longer than you can stay solvent”.
Still, as a base case a meaningful fiscal easing seems likely. Real estate developers like building stuff after all, Republicans are pretty keen on cutting taxes and this will be a lot easier to get through Congress for a Republican President. This is what incoming Republican Presidents do — they cut taxes in a meaningful way and many supposed deficit hawks useback of the napkin logic to tell themselves “these tax cuts will pay for themselves”. (Actually they won’t).Still, as a base case a meaningful fiscal easing seems likely. Real estate developers like building stuff after all, Republicans are pretty keen on cutting taxes and this will be a lot easier to get through Congress for a Republican President. This is what incoming Republican Presidents do — they cut taxes in a meaningful way and many supposed deficit hawks useback of the napkin logic to tell themselves “these tax cuts will pay for themselves”. (Actually they won’t).
But to simply assume that America gets higher economic demand, lower unemployment, a pick-up in inflation and a return to normal interest rates misses the big pictures, Weldon says:But to simply assume that America gets higher economic demand, lower unemployment, a pick-up in inflation and a return to normal interest rates misses the big pictures, Weldon says:
Implicit in that line of analysis are assumptions about the Fed’s reaction functions and about productivity growth that need to be questioned. And, crucially, it misses the biggest shift that Trump’s Presidency could bring about — a rejection of “globalisation”/economic openness.Implicit in that line of analysis are assumptions about the Fed’s reaction functions and about productivity growth that need to be questioned. And, crucially, it misses the biggest shift that Trump’s Presidency could bring about — a rejection of “globalisation”/economic openness.
And if productivity remains low, some economists fear that steady wage growth, solid corporate profits and moderate inflation is an ‘impossible trinity’ to achieve.And if productivity remains low, some economists fear that steady wage growth, solid corporate profits and moderate inflation is an ‘impossible trinity’ to achieve.
There’s lots more here:There’s lots more here:
Post: Political Economy & Trump’s Trilemmas https://t.co/Q2hVD1azfn - a long-ish read.Post: Political Economy & Trump’s Trilemmas https://t.co/Q2hVD1azfn - a long-ish read.
1.11pm GMT1.11pm GMT
13:1113:11
Hello.... the rally in European stocks is petering out.Hello.... the rally in European stocks is petering out.
The FTSE 100 has now shed its early gains and is now down 6 points, having been up 50 points at the start.The FTSE 100 has now shed its early gains and is now down 6 points, having been up 50 points at the start.
Not clear what’s prompted this...Not clear what’s prompted this...
12.53pm GMT12.53pm GMT
12:5312:53
Summers: Trump needs concrete plans and experienced peopleSummers: Trump needs concrete plans and experienced people
Larry Summers, the former US Treasury secretary, is cautiously hopeful that the infrastructure plan proposed by Donald Trump could help the US economy.Larry Summers, the former US Treasury secretary, is cautiously hopeful that the infrastructure plan proposed by Donald Trump could help the US economy.
He just told Bloomberg TV that he “welcomes and applauds” Trump’s pledge to renew America’s highways, bridges, airports schools and hospitals.He just told Bloomberg TV that he “welcomes and applauds” Trump’s pledge to renew America’s highways, bridges, airports schools and hospitals.
It could boost job creation in the short tun, and expand the US economy’s capacity for growth in the medium term, believes Summers - who has often called for more fiscal spending to fight ‘secular stagnation’.It could boost job creation in the short tun, and expand the US economy’s capacity for growth in the medium term, believes Summers - who has often called for more fiscal spending to fight ‘secular stagnation’.
But Summers also sounds deeply concerned, saying Trump needs to propose “serious and concrete plans” to address America’s economic concerns, and surround himself with responsible people with “considerable experience”.But Summers also sounds deeply concerned, saying Trump needs to propose “serious and concrete plans” to address America’s economic concerns, and surround himself with responsible people with “considerable experience”.
He says calling China a “currency manipulator” is unwise, while repealing the NAFTA trade deal would do enormous economic damage.He says calling China a “currency manipulator” is unwise, while repealing the NAFTA trade deal would do enormous economic damage.
And Summers, who served under Bill Clinton, suggets Trump cannot be as divisive in government as he was in the campaign.And Summers, who served under Bill Clinton, suggets Trump cannot be as divisive in government as he was in the campaign.
Unless there is a clear sense that all Americans are welcomed and part of his vision of a prosperous America, and all nations are part of his vision o f a prosperous world, I don’t think he’ll be successful in creating the world we all want to see, Summers concludes.Unless there is a clear sense that all Americans are welcomed and part of his vision of a prosperous America, and all nations are part of his vision o f a prosperous world, I don’t think he’ll be successful in creating the world we all want to see, Summers concludes.
12.22pm GMT12.22pm GMT
12:2212:22
Demand for gold hit a record high yesterday, which tells you a couple of things.Demand for gold hit a record high yesterday, which tells you a couple of things.
1) There was a massive flight to safe-haven assets as the shock election result rocked Asian and European markets.1) There was a massive flight to safe-haven assets as the shock election result rocked Asian and European markets.
2) People are buying gold as a hedge against inflation (the price has risen by 0.3% today).2) People are buying gold as a hedge against inflation (the price has risen by 0.3% today).
Somehow, it seems that yesterday was a busy day for #gold: COMEX aggregate gold trading volume hit a record high (h/t @EdVanDerWalt) #Trump pic.twitter.com/TC03csJ6MwSomehow, it seems that yesterday was a busy day for #gold: COMEX aggregate gold trading volume hit a record high (h/t @EdVanDerWalt) #Trump pic.twitter.com/TC03csJ6Mw
12.15pm GMT12.15pm GMT
12:1512:15
Over in America, Donald Trump is preparing to visit the White House to meet president Obama, following a night of protests against his election victory.Over in America, Donald Trump is preparing to visit the White House to meet president Obama, following a night of protests against his election victory.
Our main liveblog is covering all the details:Our main liveblog is covering all the details:
12.11pm GMT12.11pm GMT
12:1112:11
OECD: Trump must spell out his plansOECD: Trump must spell out his plans
Catherine Mann, the chief economist at the Organisation for Economic Co-operation and Development, says Donald Trump needs to flesh out his economics plans, fast.Catherine Mann, the chief economist at the Organisation for Economic Co-operation and Development, says Donald Trump needs to flesh out his economics plans, fast.
Speaking on Bloomberg TV, Mann says Trump needs to set out policies to identify sources of growth in the US economy, and make sure the benefits are shared fairly between the American people.Speaking on Bloomberg TV, Mann says Trump needs to set out policies to identify sources of growth in the US economy, and make sure the benefits are shared fairly between the American people.
That’s what got him to the White House , the fact that the gains aren’t widely shared.That’s what got him to the White House , the fact that the gains aren’t widely shared.
11.46am GMT11.46am GMT
11:4611:46
The deputy leader of Germany’s governing CDU party, Michael Fuchs, hopes that president Trump will be more responsible than nominee Trump:The deputy leader of Germany’s governing CDU party, Michael Fuchs, hopes that president Trump will be more responsible than nominee Trump:
just wait and see #trump- he already made a change of behavior now that the elections are over @flacqua @BloombergTV @bsurveillance pic.twitter.com/jeaTG1jbgEjust wait and see #trump- he already made a change of behavior now that the elections are over @flacqua @BloombergTV @bsurveillance pic.twitter.com/jeaTG1jbgE
free trade is crucial for Germany and the world - I think #Trump will be pragmatic @flacqua @BloombergTV @bsurveillancefree trade is crucial for Germany and the world - I think #Trump will be pragmatic @flacqua @BloombergTV @bsurveillance
11.21am GMT11.21am GMT
11:2111:21
Copper surgesCopper surges
The copper prices has hit its highest level since July 2015, up 5% today, thanks to Trump’s promise to rebuild America’s infrastructure.The copper prices has hit its highest level since July 2015, up 5% today, thanks to Trump’s promise to rebuild America’s infrastructure.
And shares in two mining companies, Antofagasta and Vedanta, have both soared by 14% as investors anticipate a new fiscal boost next year.And shares in two mining companies, Antofagasta and Vedanta, have both soared by 14% as investors anticipate a new fiscal boost next year.
Ole Hansen, head of commodity strategy at Saxo Bank, says copper is the ‘big winner’ from Trump’s victory (which won’t be much comfort to those on the losing side).Ole Hansen, head of commodity strategy at Saxo Bank, says copper is the ‘big winner’ from Trump’s victory (which won’t be much comfort to those on the losing side).
He adds:He adds:
President elect Donald Trump’s pledge to spend more than $500 billion on rebuilding America’sroads, bridges and airports helped send construction and steel stocks sharply higher following his surprise election win.President elect Donald Trump’s pledge to spend more than $500 billion on rebuilding America’sroads, bridges and airports helped send construction and steel stocks sharply higher following his surprise election win.
Tom Albanese, chief executive officer of Vedanta Resources, also anticipates a boost.Tom Albanese, chief executive officer of Vedanta Resources, also anticipates a boost.
He says (via Blooomberg):He says (via Blooomberg):
All that we see for President-elect Trump is that he will focus on building, he will focus on the infrastructure.All that we see for President-elect Trump is that he will focus on building, he will focus on the infrastructure.
“That is what the market is reacting to.”“That is what the market is reacting to.”
Whopping gains for the copper miners today https://t.co/0ZBDERxcTG pic.twitter.com/SipIO5PAFqWhopping gains for the copper miners today https://t.co/0ZBDERxcTG pic.twitter.com/SipIO5PAFq
UpdatedUpdated
at 11.31am GMTat 11.31am GMT
10.45am GMT10.45am GMT
10:4510:45
Trump’s victory is also driving up the shares of military and defence companies.Trump’s victory is also driving up the shares of military and defence companies.
BAE Systems have jumped by 6% this morning, adding to yesterday’s spike following the election result.BAE Systems have jumped by 6% this morning, adding to yesterday’s spike following the election result.
It’s a sign that the City expect Trump to deliver on his promise to boost spending on the US military (which he claimed had become depleted on president Obama’s watch). BAE is one of the biggest suppliers to the US department of defence, and makes armoured vehicles, ships, fighter jets and missiles.It’s a sign that the City expect Trump to deliver on his promise to boost spending on the US military (which he claimed had become depleted on president Obama’s watch). BAE is one of the biggest suppliers to the US department of defence, and makes armoured vehicles, ships, fighter jets and missiles.
And if Trump weakens the ties between Nato members, then European countries may feel compelled to boost their own armies.And if Trump weakens the ties between Nato members, then European countries may feel compelled to boost their own armies.
10.26am GMT10.26am GMT
10:2610:26
Here’s confirmation that inflation expectations are rising, via analyst Arne Petimezas of AFS Group:Here’s confirmation that inflation expectations are rising, via analyst Arne Petimezas of AFS Group:
Reflation trade is on pic.twitter.com/gmbUfq65VIReflation trade is on pic.twitter.com/gmbUfq65VI