US bond yields rise after Trump win

FRANKFURT, Germany (AP) — U.S. bond yields have risen strongly in the wake of Trump’s victory, a sign that investors think the outlook for the U.S. economy remains positive.

The yield, or interest rate, on the U.S.’s ten-year bonds is up 0.08 percentage point at 1.948 percent. That has helped the dollar recover its poise following earlier losses when Trump’s victory became increasingly likely. The euro, for example, is now basically flat on the day at $1.1025.

Kathleen Brooks, a research director at City Index in London, thinks the rise in the yield may represent some optimism over the U.S. economic outlook given Republican control of both the White House and Congress. That clarity in government, she said, could aid growth.

However, she warns that there could be problems ahead if yields continue to rise over the coming days and weeks. If they do, she says “concern may grow that bonds are selling off due to fears of America’s creditworthiness under a President Trump.”

Investors are bracing for a rough day for some health care stocks after the Republican victories in Tuesday’s elections.

Mizuho Securities analyst Sheryl Skolnick says the Trump win and looming GOP control of Congress represent a worst-possible outcome for health care stocks. She says that a repeal of the Affordable Care Act, something Trump has promised, would take away the expansion in several states of the government’s Medicaid program for the poor, and that expansion helped both hospital and health insurance stocks.

Skolnick lowered her rating on several stocks, including the nation’s hospital chain HCA Inc. and the largest health insurer, UnitedHealth Group Inc., to “neutral” from “buy.”

For financial markets, Trump’s victory is the latest manifestation of a backlash against globalization.

Christopher Mahon, Director of Asset Allocation Research at Barings, says Trump’s victory is an example of people believing that inequalities in society are a result of globalization. That belief, he says, was behind the unrest in Greece during that country’s debt crisis over the past few years as well as Britain’s vote in June to leave the European Union.

Mahon says “globalization and the liberal economic consensus is in full retreat” if Trump doesn’t temper his views.

He says it “is clear that this next president will have a profound effect on global markets.”

With less than three hours before Wall Street opens for business following Trump’s victory, the mood in financial markets remains sanguine, especially when compared to the initial impact of his stunning win.

When it became apparent that Trump was surging to victory following a run of triumphs in key swing states, predictions about the open on Wall Street were extremely negative. The Dow was forecast to open some 800 points lower.

But following a fairly conciliatory victory speech by the president-elect, the Dow is now anticipated to open down 360 points, or 2 percent.

Connor Campbell, a trader at Spreadex, says “a surprisingly `presidential’ Trump victory speech …. seems to have reassured investors .”

 

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