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- Author, João da Silva and Charlotte Edwards
- Role, Business reporters, BBC News
US stocks hit record highs on Wall Street and the dollar posted its biggest gain in eight years as Donald Trump was re-elected to the White House in a historic victory.
Bitcoin also hit an all-time high, following Trump’s election pledge to prioritize the volatile cryptocurrency.
However, investors bet that Trump’s plan to cut taxes and raise tariffs will push up inflation and slow the pace of rate cuts.
Higher interest rates for longer periods mean that investors will get better returns on savings and investments they have in dollars.
Markets and currencies around the world moved sharply on Wednesday following the US election news:
- The major US stock indexes soared, with banks performing particularly well
- The dollar rose about 1.65% against a range of currencies, including the pound, the euro and the Japanese yen
- The pound fell 1.16% against the US dollar to its lowest level since August
- The FTSE 100 index, which includes the biggest companies listed in the UK, rose in early trade before closing marginally lower
- The euro dived 1.89% against the US dollar to its lowest level since June as the German Dax and French CAC 40 and share indices closed down 1.14% and 0.51% respectively
- In Japan, the benchmark Nikkei 225 stock index ended up 2.6%
- In mainland China, the Shanghai Composite Index ended 0.1% lower, while Hong Kong’s Hang Seng fell about 2.23%
Why is Bitcoin going up?
The value of Bitcoin rose by more than $6,600 (£5,120) to an all-time high of $75,999.04.
Trump’s approach to crypto stands in stark contrast to that of the Biden administration, which has led to a sweeping crackdown on crypto companies.
He promised to make the US the “world’s bitcoin superpower”.
During the election campaign, Trump had suggested that he might fire Gary Gensler, chairman of the US regulator Securities and Exchange Commission, which has taken legal action against several crypto companies.
Trump also said he plans to put billionaire Elon Musk in charge of an audit of government waste.
Musk has long been a proponent of cryptocurrencies, and his company Tesla invested $1.5 billion in Bitcoin in 2021, although the price of the digital currency can be highly volatile.
Tesla shares rose more than 14% on Wednesday to a two-year high. Mr. Musk, Tesla’s largest shareholder, has supported Trump throughout his election campaign.
Experts said there was turmoil elsewhere in financial markets, but in response to global uncertainty and Trump’s potential plans for the economy.
U.S. bond yields, the yield a government promises to pay buyers of its debt, soared on Wednesday.
A bond is essentially an IOU that can be traded in the financial markets, and governments often sell bonds to investors when they want to borrow money.
The moves may indicate that investors believe borrowing will increase under the new administration and are demanding higher returns for their money.
Tariff effect
Some economists have also warned that Trump’s trade proposals would come as a “shock” to countries around the world, including the eurozone and the UK economy.
Chancellor Rachel Reeves has said Britain will make “strong representations” to President-elect Donald Trump about the need for free and open global trade.
“The United States also benefits from that access to free and open trade with us and other countries around the world, and that’s what makes us richer as societies, to benefit from that open trade,” she said.
Donald Trump has said he would dramatically raise trade tariffs, particularly against China, if he became the next US president.
Ahmet Kaya, chief economist for the National Institute of Economic and Social Research (Niesr), also said the UK could be “one of the countries most affected” under such plans.
It estimates UK economic growth would slow to 0.4% in 2025, down from a forecast of 1.2%.
Katrina Ell, head of economic research at Moody’s Analytics said: “Trump’s global trade policies are causing particular anxiety in Asia, given the strong protectionist platform where more aggressive tariffs on US imports have been promised.”
Trump’s more isolationist approach to foreign policy has also raised questions about his willingness to defend Taiwan against potential aggression from China.
The self-governing island is a major producer of computer chips, which are vital to the technology that powers the global economy.
Investors also have other key issues to focus on this week.
On Thursday, the US Federal Reserve will announce its latest decision on interest rates.
Comments from Federal Reserve Chairman Jerome Powell will be closely watched around the world.
North America correspondent Anthony Zurcher understands the race for the White House in his twice-weekly US Election Unspun newsletter. Readers in the UK can register here. Those outside the UK can sign up here.
