Appointment of the US Treasury Secretary: Reassurance for the Markets

The appointment of Donald Trump's candidate for US Secretary of the Treasury led to a positive reaction in the bond market, while the dollar fell alongside yields, which could also affect Asian trading. After the election late Friday of the esteemed investor Scott Bessent, this decision played out in the markets on Monday. The long-awaited announcement ended speculation over who would assume the highest economic position in the US. Yields on US Treasury bonds, which move inversely to prices, fell significantly, with the benchmark yield for ten-year bonds reaching its lowest level in over two weeks. Previously, there had been a rapid rise in yields fueled by fears that Trump's presidency could significantly increase the budget deficit. However, Bessent is seen as a potential stabilizing factor who could help offset the negative effects of Trump's fiscal policy. Market observers view his market expertise as a calming element that could mitigate the double burden of protectionist tariff measures that Trump advocates. The dollar index, which had been on an upward trend since early October, recorded a noticeable decline. A weaker dollar could benefit emerging markets that are heavily indebted in US dollars and dispel concerns about a rising dollar during Trump's tenure. The resolved uncertainty regarding the Treasury Secretary's appointment and the lower bond yields supported the stock markets. The global equity index from MSCI rose by about 0.4%, while the US S&P 500 gained 0.3%. Special attention was given to US small-cap stocks, as the Russell 2000 reached a record high during the day for the first time in three years. Small businesses could benefit from Trump's plans to cut taxes and deregulate, while the Fed's interest rate cuts could favor smaller companies more reliant on external financing. However, there were not only positive developments in the stock markets. Chinese stocks fell amid concerns about escalating trade conflicts dampening risk appetite. The Shanghai Composite Index reached its lowest level in about a month. In other areas, signs of a ceasefire deal between Israel and the militant group Hezbollah in Lebanon led to a decline in oil and gold prices. The appointment of the Treasury Secretary also contributed to reduced interest in precious metals. With the approach of the Thanksgiving holiday in the US on Thursday, a decrease in trading activity was expected, although central bank decisions in New Zealand and South Korea and inflation data in the US could add excitement during the week.