US bond yields and the dollar climbed higher on Thursday as investors evaluated the potential inflationary effects of President-elect Donald Trump’s policies, while European shares posted gains amid a more optimistic growth outlook, Reuters reports.
Meanwhile, Bitcoin surged back above the $90,000 mark, buoyed by Trump’s return to the White House and anticipation of a cryptocurrency-friendly administration.
Longer-dated US bond yields rose in response to projections that Trump’s policies—centered around tax cuts and elevated tariffs—could stimulate inflation and curb the Federal Reserve’s room for rate cuts. The 10-year Treasury yield hit 4.483%, its highest level since early July, with the 30-year yield holding near a five-month peak at 4.6397%, according to data from LSEG.
Analysts are cautious about the inflationary impact of these policies.
“Even though we’re not optimistic Trump’s policies will be a big boost to growth, they will increase indebtedness and boost inflation, which could change the Fed’s plans,” said Jan von Gerich, chief analyst at Nordea.
Investors are pricing in an 83% chance of a 25-basis-point Fed rate cut next month, according to CME’s FedWatch tool, but expectations for cuts in 2025 have been pared back in the wake of Trump’s victory.
Bitcoin continued its ascent, last trading 2.3% higher at $90,654, marking a remarkable 30% rise over the past two weeks. Trump’s return to office has fueled expectations that the administration will support digital assets, further boosting the world’s largest cryptocurrency. Bitcoin’s recent performance underscores investors’ optimism that cryptocurrency markets could benefit from policy shifts under Trump.
The US dollar also advanced, hitting a one-year peak at 106.77 on the dollar index. Rising long-term Treasury yields, combined with anticipated inflationary policies, propelled the greenback, which pushed the euro to a one-year low of $1.0534 and crossed the 156-yen threshold. The Australian dollar dropped 0.33% to $0.6464, further weighed down by weaker-than-expected domestic employment data.
European stocks trended upward on Thursday, with the Euro STOXX 50 rising 0.6% and the STOXX 600 climbing 0.2%, supported by strong earnings reports from companies like Deutsche Telekom and tech firm ASML. The positive sentiment in Europe contrasts with declines in Asia, where China’s markets dropped despite recent economic support measures from Beijing. Hong Kong’s Hang Seng Index slid 2%, and Japan’s Nikkei lost 0.5%.
China’s property sector continues to drag on growth, and the recent measures from Beijing, including tax incentives for property transactions, have failed to spark investor confidence.
“The incentives help, but it’s not going to galvanize a lot of people to start buying homes. The inventory overhang is still there,” commented Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
Adding to concerns about US-China relations, Trump nominated China hardliner Marco Rubio as secretary of state, reinforcing market expectations of a more hawkish stance toward Beijing, which could further affect Chinese markets.
In commodity markets, oil prices remained steady, with Brent crude at $72.30 a barrel and West Texas Intermediate (WTI) at $68.43. Spot gold dropped 0.7% to $2,555.99 an ounce amid the stronger dollar and high bond yields.
