US stock market soars after Donald Trump declares victory in presidential election

ABC NEWS (Australia)

US stocks have soared with investors buoyed by Donald Trump’s return to the White House. Big banks led the way on expectations Mr Trump’s policies will lead to stronger economic growth and less regulation.

Transcript

00:00The market was up 3.6 per cent, the Dow Jones Industrial Average at least, and so that's

00:06a huge lift on Wall Street overnight following this.

00:10There was a couple of other reasons in there though.

00:12I mean a lot of investors did expect this to be a much tighter race and the prospect

00:18of a drawn out legal battle and possibly even social unrest and perhaps even violence really

00:25unsettled markets prior to that.

00:28So the fact that Kamala Harris actually conceded very quickly just lifted all fears and so

00:34the volatility index dived and people really just went for stocks.

00:38Gotcha, so it gave that certainty there.

00:40Now we know that Donald Trump has promised tariffs on US imports of Chinese goods.

00:44What effect will that have and what could be the knock-on effect that we feel here from

00:48that?

00:49Well look, everyone is pretty much in agreement that if Donald Trump does manage to get all

00:54of his policies in place to the stated degree, 10 per cent tariffs worldwide and possibly

00:5960 per cent on China, that will lift inflation in the US and possibly globally.

01:05It will result in lower growth globally and possibly higher interest rates around the

01:10world.

01:11So it's not looking particularly positive on all fronts and interestingly we talk about

01:17Wall Street and the market really racing ahead overnight.

01:21For the past six weeks, money markets, particularly in the US, have been going in the other direction.

01:27So interest rates, the 10-year government bond rate in the US, which is the global benchmark

01:32for interest rates, it's been rising.

01:35Interest rates have been rising for six weeks now in anticipation that perhaps global interest

01:40rates will be forced to rise if Donald Trump wins back the White House, which is suddenly

01:45done.

01:46So far, this is really, really unusual because the US Federal Reserve, the world's biggest

01:53central bank, is in the process of a rate-cutting cycle.

01:57It's only just started.

01:58Now it's had one cut so far, a double cut, and it's got another one coming tonight.

02:03So the fact that the money markets are pushing rates in the opposite direction to the US

02:08Federal Reserve, incredibly unusual here.

02:11So markets are expecting higher inflation and higher interest rates.

02:17On tariffs again, and understanding that we would feel the effects on tariffs on Chinese

02:21goods of course, but we have a free trade agreement with the US, does that give some

02:25protection for Australian firms from any tariffs from the US?

02:29Free trade agreements really aren't worth the paper they're written on.

02:32All you've got to do is look at our free trade agreement with China a couple of years ago,

02:36where they basically imposed trade restrictions on everything that we export to them apart

02:41from iron ore, to give you a bit of an indication there.

02:44So no, I don't think that free trade agreement will protect us.

02:47It would require negotiations between our government and the US government to get some

02:52kind of concession through, which did happen in the last Trump administration.

02:56We did manage to negotiate our way through tariffs at that stage.

03:00But look, there's no doubt that if the tariffs that the US is talking about imposing on China

03:06come into force, that will affect the Chinese economy in a major way.

03:10And we are of course, China is our biggest trading partner, it couldn't help but affect

03:14us as well.

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