World markets graple with implications of Trump victory

US stocks faltered on Thursday after the Dow Jones hit a new record as investors got nervous that a rally driven by optimism on Donald Trump’s pro-business policies might have moved to far, too fast.

Financial institutions and drug companies have been the big winners in the Trump bounce, with the technology-heavy Nasdaq failing to match the vigour of the blue chip industrial index.

In Europe markets also came back a bit after an overnight session in Asia characterised by sharp gains as investors grappled with the implications of the Trump victory.

"Investors are puzzled with their emotional investment decisions. They were risk-averse yesterday, then after seeing that Americans were optimistic and chasing the market higher, they wasted no time reversing their positions," said Takuya Takahashi, a strategist at Daiwa Securities in Tokyo.

Euro zone bond yields, including Ireland’s, have hit multi-month highs, rising in the slipstream of the biggest surge in US yields seen in years as investors bet Mr Trump’s protectionist trade policies and fiscal spending will boost inflation.

The yield on Ireland’s 10-year note, which fell to an all-time low of 0.31 per cent at the end of September, rose to 0.85 per cent, its highest level since mid-June, after gains in excess of 10 basis points in each of the last two sessions.

German and French government bond yields rose to their highest levels in six months.

Bond auction

The US treasury’s $15 billion 30-year bond auction on Thursday again showed waning investor appetite for US debt. The bid-cover ratio, a gauge of demand, fell to 2.11, the lowest level since February. Buying from indirect bidders, a category that includes foreign central banks, was the lowest since 2015.

That mirrors the US government’s sale of 10-year debt on Wednesday, which saw the smallest demand since 2009, particularly from foreign buyers, as Trump’s victory spurred the biggest sell-off in five years.

"They're basically selling Treasuries because they really don't know what Donald Trump has in store for them," Tom di Galoma, managing director of government trading and strategy at Seaport Global Holdings in New York, said. "Most of the activity is coming from overseas. They're not sure what he's all about."

Greenback

The dollar also continued to strengthen and was trading up 0.46 per cent at 98.959 against a basket of major currencies. The greenback was on track for its fourth session of gains. The currency rose 1 per cent to 106.72 yen, touching the highest since July. It strengthened for a fourth day to $1.0895 to the euro, a gain of more than 1 per cent.

The strength in the dollar weighed on gold which fell 1 per cent to $1,264.86 per ounce, on track for its third decline in four days. The dollar rise also was a drag on oil prices, with both Brent and US crude down more than 1 per cent.

– Additional reporting, Reuters