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MORNING QUOTE EUROPE-' Trump trades' in complete swing

A look at the day ahead in European and worldwide markets from Wayne Cole.

It's been a wild trip in markets with the dollar and Wall Street futures rising while Treasuries took a beating as early results in the presidential election favoured Republican politician Donald Trump.

Numerous crucial battleground states were still to be called, but wagering sites greatly favoured Trump and the NY Times real-time projection predicted a 91% possibility of him winning. Experts typically assume Trump's plans for restricted immigration, tax cuts and sweeping tariffs if enacted would put more upward pressure on inflation and bond yields than would Harris' centre-left policies.

Trump's propositions would also tend to rise the dollar and possibly restrict how far U.S. interest rates might ultimately be decreased.

Hence while markets were still confident the Federal Reserve would cut interest rates by 25 basis points on Thursday, futures for next year alleviated into the red with December down 8 ticks.

The threat of a higher terminal Fed funds rate integrated with the possibility of ever-larger budget deficits to hammer Treasuries, sending out 10-year yields to four-month highs and two-year yields to a three-month top. Ten-year yields were last up 17 basis points at 4.449%, the sharpest increase considering that April.

The jump in yields sustained bullish bets on the dollar, which boasted its biggest daily gain because early last year. The euro, yen and Swiss franc all sank more than 1%, while the trade-exposed Australian and New Zealand dollars dived to three-month lows.

China's yuan also took a tumble on fears Trump would follow through on strategies to impose penalizing tariffs on Chinese products.

Wall Street eagerly anticipated assured tax cuts and less business policy, with S&P 500 futures up 1.2% and Nasdaq getting 1.3%.

European stock futures were less enthused as Trump's tariff policies, if enacted, might spark a global trade war and threaten EU exports.

There was likewise the threat Trump might pull out of NATO, forcing Europe to spend more on defence, while pushing Russia in its territorial ambitions.

Secret developments that could affect markets on Wednesday:

- EZ services PMIs for Oct, manufacturer rates for Sept

- German industrial orders for Sept

- US services PMI for Oct

(source: Reuters)