Asian stock markets experienced modest gains, while the U.S. dollar strengthened against major currencies and U.S. Treasury yields rose, as investors responded to preliminary results from the presidential election.
Although the results remain uncertain, early trading in Asia indicated that investors were positioning for a potential victory by former President Donald J. Trump. Stocks and government bond yields increased, and Bitcoin reached a record high in early Wednesday trading, reflecting expectations of economic stimulus under a Trump administration.
The U.S. dollar appreciated against the Japanese yen, Mexican peso, and Chinese yuan, currencies likely to be impacted by Trump's proposed tariff increases. Andrew Brenner, head of international fixed income at National Alliance Securities, noted that the market's early reaction seemed to favor Trump but emphasized that the situation is still developing.
In October, expectations of a Republican victory began to drive up U.S. Treasury yields and the dollar's value against global currencies. This was partly due to anticipated policies from Trump that could stimulate growth while significantly increasing government spending, which analysts believe would ultimately lead to higher interest rates.
However, in the past week, as betting markets shifted slightly away from Trump, some investors pulled back from their positions. A potential victory for Vice President Kamala Harris is viewed as a continuation of existing policies amid economic growth and Federal Reserve interest rate cuts, which typically support stock prices.
In an indication of the market's initial favor towards Harris's opponent, the 10-year U.S. Treasury yield rose by more than 0.1 percentage point to over 4.4 percent on Wednesday morning. An index tracking the dollar's value against other major currencies increased by 1.2 percent, with the Japanese yen weakening by 1.6 percent to 154.12 per dollar.
Stock markets across the region extended gains from the previous day, with Japan's Nikkei 225 rising by 2.2 percent. The Shanghai Stock Exchange showed volatility, while Hong Kong's Hang Seng Index fell by 2.7 percent. Bruce Pang, chief economist for the greater China area at JLL, attributed the decline in Hong Kong stocks to their vulnerability to a weaker Chinese currency.
U.S. stock futures were also up by more than 1 percent. In the cryptocurrency market, Bitcoin surged nearly 9 percent in the last 24 hours, surpassing $74,000 and breaking a record set in March. Trump's campaign has included support for cryptocurrencies, leading to speculation that a Republican victory would boost digital currency prices.
Over recent months, cryptocurrency values have fluctuated based on perceptions of Trump's electoral chances. Bitcoin prices nearly reached a record high last month as online bettors favored Trump's candidacy, but they have since dipped.
Trump Media & Technology Group, the parent company of Truth Social, is closely tied to Trump's political fortunes. As the most significant user and largest shareholder, Trump's political fate heavily influences the company's stock price, which saw significant fluctuations in after-hours trading, initially rising by 25 percent before settling at a 10 percent gain.