Stocks dip, bitcoin approaches $90,000 as 'Trump trade' takes hold

By Chuck Mikolajczak

NEW YORK (Reuters) -Global stocks dipped on Tuesday after five straight sessions of gains while the dollar touched its highest level in over four months as investors gauge the impact of U.S. President-elect Donald Trump's likely policies on growth and inflation.

Investors have been pouring cash into assets believed to benefit from Trump policies for his second term in office, in which he has pledged to impose high tariffs on imports from key trading partners, as well lower taxes and loosen government regulations.

The S&P 500 has surged to record highs, in part due to a jump in shares of banks, which are likely to benefit from a reduced regulatory burden. Domestically focused small-cap stocks have jumped on expectations for less competition from tariffs and lower tax rates, as the Russell 2000 vaulted to a three-year high on Monday.

Bitcoin , the world's biggest cryptocurrency, has surged about 30% since the Nov. 5 election as it rockets toward the $90,000 mark. Trump is seen as a proponent of cryptocurrencies.

U.S. stocks have rallied since the election, with each of Wall Street's three major indexes closing at record levels on Monday.

But concerns that Trump's policies could reignite inflation after a long battle following the COVID-19 pandemic have pushed U.S. Treasury yields and the dollar higher. Markets will get the latest inflation reading on Wednesday in the consumer price index (CPI) for October.

"I don't attribute it to much more than a little bit of profit taking after a fabulous week," said Paul Nolte, senior wealth adviser and market strategist Murphy & Sylvest in Elmhurst, Illinois.

The Dow Jones Industrial Average fell 61.89 points, or 0.14%, to 44,231.24, the S&P 500 rose 0.27 point, or 0.00%, to 6,001.62 and the Nasdaq Composite rose 24.13 points, or 0.13%, to 19,322.90.

Shares of Home Depot (NYSE:HD ) were down 0.4%, giving up earlier gains, after the home improvement retailer reported quarterly results.

In Europe, shares were lower, weighed down by names with a large exposure to China, as Trump was expected to select U.S. Senator Marco Rubio as his secretary of state. Rubio is seen as the most hawkish option on Trump's list.

MSCI's gauge of stocks across the globe fell 4.00 points, or 0.46%, to 859.10. The STOXX 600 index fell 1.53%, while Europe's broad FTSE EuroFirst 300 index fell 30.79 points or 1.52% as both were on track for their biggest daily percentage drops since August.

The yield on benchmark U.S. 10-year notes rose 7 basis points to 4.378%, from 4.308% late on Friday, after the bond market was closed on Monday.

Aside from the CPI data, investors will hear from several Federal Reserve officials this week following the central bank's latest policy announcement on Nov. 7 in which it cut interest rates by 25 basis points.

Richmond Fed President Thomas Barkin said that with inflation close to the Federal Reserve's 2% target, the labor market resilient and the U.S. central bank in the process of lowering borrowing costs, policymakers are ready to respond if inflation pressures rise or the job market weakens.

The dollar index , which measures the greenback against a basket of currencies, rose 0.52% to 105.97, with the euro down 0.42% at $1.0609. The greenback has risen in four of five sessions since the election to reach 106.03, its highest level since July 2.

Against the Japanese yen, the dollar strengthened 0.5% to 154.48 while Sterling weakened 0.74% to $1.2774.

The dollar strengthened 0.25% to 7.245 versus the offshore Chinese yuan .



The greenback is expected to continue to strengthen against China's currency and those sensitive to its economy as a result of Trump's trade policies and also because of expectations of higher U.S. Treasury yields. Markets have been scaling back expectations for more rate cuts from the Federal Reserve, currently pricing in a 65.1% chance of a 25 basis-point cut at its December meeting, down from 77.3% a week ago, according to CME's FedWatch Tool.

U.S. crude rose 1.09% to $68.78 a barrel and Brent rose to $72.56 per barrel, up 1.02% on the day, bouncing back from a drop of more than 5% over the prior two sessions.

Source: Investing.com