SINGAPORE – Financial markets reacted positively to President-elect Donald Trump’s selection of Scott Bessent as U.S. Treasury Secretary, with bond prices rising and the dollar dipping. The appointment sparked optimism in the bond market, where investors believe Bessent could help manage U.S. debt and fiscal policy. This, in turn, pushed bond yields lower, weighing on the dollar and boosting U.S. stock futures, which are nearing record highs.
U.S. Stock Futures: S&P 500 futures rose by 0.5%, while Dow and Nasdaq futures gained 0.6%.
European Stocks: Even beleaguered European futures climbed 0.7%.
Euro: After hitting a two-year low on Friday, the euro bounced by 0.5%.
Bond Markets React Favorably to Bessent’s Appointment
Benchmark 10-year U.S. Treasury yields dropped more than 5 basis points to 4.355%, signaling investor optimism that Bessent will effectively manage U.S. fiscal policy. The lower yields coincided with a weaker U.S. dollar against major currencies, including the yen, sterling, and Antipodean currencies (Australia and New Zealand).
Stephen Spratt, a strategist at Societe Generale, noted that Bessent is considered a “safe hands” choice for Treasury Secretary. This was a relief to markets that had previously priced in the possibility of a more unconventional pick. Bessent has a track record of advocating for fiscal restraint, particularly around U.S. borrowing, which contributed to positive sentiment among bond investors.
Mixed Reactions in Asia
Asian markets also reflected the positive mood, with Japan’s Nikkei jumping by 1.7%. Meanwhile, stock markets in Sydney and Seoul saw rises, though Hong Kong and China experienced declines. The MSCI Asia ex-Japan Index gained 0.7%, supported by a broad rally in Asian equities outside of Japan.
Impact on Global Currencies
The Chinese yuan saw only a brief boost after Bessent’s appointment. As of Monday, the currency traded flat at 7.2445 against the dollar. E-commerce stocks in Hong Kong were under pressure, with the Hang Seng index falling by 0.4%, while the Shanghai Composite dropped 0.6%.
Meanwhile, the euro found some relief, recovering from last week’s lows. It traded at $1.0457, although it remained under pressure following weak European manufacturing surveys. ECB chief economist Philip Lane further dampened expectations for the euro, indicating that the European Central Bank may cut rates to support the economy.
Looking Ahead: U.S. Economic Data and Fed Minutes
Despite a lighter trading week due to the Thanksgiving holiday in the U.S., there are several key economic data releases:
- October PCE Price Index (preferred inflation gauge for the Federal Reserve) and jobless claims will be released on Wednesday.
- U.S. GDP estimates and Federal Reserve meeting minutes are due on Tuesday.
Market pricing for a Federal Reserve rate cut in December has remained steady, with investors split on whether the Fed will hold rates or implement a 25 basis point cut. In contrast, there are growing expectations for a 50 basis point rate cut in New Zealand, with a one-third chance of a 75 basis point cut.
Cryptocurrency Market
Bitcoin also saw a slight increase, trading at $98,334 on Monday after reaching a record high of $99,830 on Friday. The cryptocurrency has gained around 45% since Trump’s election victory on November 5, buoyed by expectations of a more crypto-friendly regulatory environment under his administration.
In summary, markets responded positively to Bessent’s Treasury Secretary nomination, with bond yields dropping and stock futures rising. The U.S. dollar weakened as expectations grew that Bessent would help control U.S. debt, while global equities, including those in Asia, also saw gains. However, the euro remains under pressure due to weaker European economic data and ongoing ECB concerns.
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