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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden (until 2.35) and Nick Fletcher

Bond rout continues as experts blast Trump's economic plan – as it happened

Bank buildings in the Financial centre of Canary Wharf .
Bank buildings in the Financial centre of Canary Wharf . Photograph: Alamy Stock Photo

The prospect of increased US spending and rising interest rates has pushed the dollar index above 100 for the first time since December. Fawad Razaqzada, market analyst at Forex.com, said:

The dollar index does appear to be a little bit overbought around these levels, though technically the trend looks strong as it resides inside a bullish channel and above the main moving averages. So, a short-term pullback would not come as a surprise to me, before we potentially see higher levels. That being said, the 100 level has now been tested several times since March 2015. The more a level is tested, the more likely it will break in the direction of the test...It should be noted that if the dollar were to rise further then this will be bad news for US stock. Up until now, they have been rising and falling in unison. This relationship cannot continue indefinitely as the appreciating dollar is supposed to weigh on company earnings.

Dollar Index breaches 100
Dollar Index breaches 100 Photograph: eSignal and Forex.com

On that note, it’s time to close for the evening. Thanks for all your comments, and we’ll be back tomorrow.

European bond yields are unlikely to rise as fast as those in the US following Donald Trump’s shock presidential election victory, says Capital Economics Simon MacAdam:

In the wake of Donald Trump’s victory in the US presidential election, we are nudging up our forecasts for government bond yields in Europe. But we still don’t expect that they will rise as fast as in the US.

Treasury yields have risen sharply in the US since the election there on 8th November. This reflects investors’ expectations of a major fiscal stimulus under President Trump, which would both increase the supply of bonds and mainly boost inflation at this stage of the US business cycle. (See our Global Markets Update, “New – even more bearish – forecasts for Treasuries”, published on Friday.) Although government bond yields have also risen in Europe, the increases have been significantly smaller than in the US and we expect European government bonds to continue doing better than Treasuries in the months ahead.

For a start, there is a far lower chance of a major fiscal loosening in Europe. Granted, we expect UK Chancellor Phillip Hammond to scale back the pace of fiscal tightening over the coming years in his Autumn Statement later this month. But this is likely to fall short of an outright fiscal stimulus. And there is even less scope for a fiscal expansion in the euro-zone.

Second, a given amount of fiscal loosening would generate less inflationary pressure in Europe compared to the US. This is because there is a greater degree of spare capacity in the economies of Europe, particularly in the euro-zone.

Third, following the UK’s Brexit vote, Trump’s victory has stoked fears of more populist revolts occurring down the line in parts of Europe, including in France, in spring’s presidential election. While Bunds have arguably already benefited to some degree from the uncertainty, any increase in perceived political risk should further boost safe-haven demand, thereby helping to contain yields there.

European markets edge higher

Despite Wall Street coming off its best levels after earlier hitting a new peak, European markets have managed to end the day in positive territory. With bond markets under pressure on the basis that Donald Trump’s presidency could see increased spending and a rise in inflation, equities have been a partial beneficiary.

In the bond market, Italian 10 year yield rose 18 basis points at one time to their highest since September 2015, German 30 year yields were at their highest for six months while US 10 yields were at their highest since December. However bond prices have since regained some ground, meaning yields are off their highest levels. Joshua Mahony, market analyst at IG, said:

The recent resurgence of inflation expectations, coupled with a remarkably buoyant stock market, point towards a likely rate hike in December, and this has helped fuel the drive towards the dollar and away from US treasuries.

In equities, the final scores in Europe showed:

  • The FTSE 100 finished 22.75 points or 0.34% higher at 6753.18
  • Germany’s Dax rose 0.24% to 10,693.69
  • France’s Cac closed up 0.43% at 4508.55
  • Spain’s Ibex ended up 0.22% at 8658.2
  • But Italy’s FTSE MIB fell 0.75% to 16,686.33 amid nervousness ahead of the country’s forthcoming referendum
  • In Greece, the Athens market slipped 0.47% to 579.88

On Wall Street, the Dow Jones Industrial Average is currently down 22 points at 18824, having earlier hit an intra-day record of 18934.

US technology stocks are missing out on the market’s current rally, on fears that some of Donald Trump’s policies will prove unfavourable.

Talk of the president-elect slapping tariffs on Chinese goods raised fears of retaliation which could hit the likes of Apple’s expansion plans. Even the prospect of tax breaks allowing such companies to repatriate some of their cash piles has not proved to be much support for the shares.

Nor are the major tech companies likely to benefit from Trump’s proposed programme of infrastructure spending, said Jasper Lawler, market analyst at CMC Markets:

Tech stocks like Facebook and Netflix won’t get any government contracts in a rise in infrastructure spending but Chinese expansion plans are at risk by possible trade tariffs.

So Apple is currently down 3.2% while Facebook has fallen 3.7%.

More fallout from the strong dollar: oil prices are heading lower again.

It is not just the dollar hitting crude, however. Investors had been hoping that a key Opec meeting at the end of this month would agree measures to curb output and thus support prices. But the closer the meeting gets, the more the doubts grow and put pressure on the crude price.

So Brent is currently down 1.59% at $44.04 a barrel while West Texax Intermediate has slipped 1.68% to £42.68.

Over in Greece, government officials are preparing for a new round of talks with inspectors representing the country’s foreign lenders following Barack Obama’s extraordinary call for Athens to be granted “meaningful debt relief.” Our correspondent Helena Smith reports:

Rarely has there been such desire from a sitting government in Athens to conclude a review with auditors representing the bodies that have thrice bailed out Greece since 2010. Highlighting that sentiment, the new government spokesman Dimitris Tzanakopoulos told reporters earlier that differences between the two are “very small.”

The talks, which begin in earnest tomorrow, will focus on an overhaul of labour laws including annulment of collective work agreements and mass firings (a red line many in the ruling left wing Syriza party), privatisations and primary surplus targets for 2019. Next year’s budget will also be discussed. The goal – one dismissed as untenable by most – is for the inspection tour to be wrapped up in a matter of days in the hope that debt relief talks can begin when euro zone finance ministers hold their last meeting of the year on December 5.

If debt-serving costs are brought down, it will reduce the need for the country to achieve a 3.5% primary surplus by 2018 – a target set by lenders but almost unequivocally derided as impossible to meet.

Ahead of president Barack Obama’s arrival in the Greek capital on Tuesday the government has gone out of its way to play up the two-day visit with Tzanakopoulos saying today that it had not only been heartened by his intervention on the matter of Greek debt but calling the tour one of great significance. The trip, which will see the US president flying straight to Berlin after Athens, is expected to be heavy on symbolism as Obama’s last state visit abroad.

To date only the IMF has highlighted the problem of a debt load it has long called “unmanageable.” Greek officials now hope the US leader will bring pressure to bear on the German chancellor when he, too, highlights the issue in talks between the two on Wednesday.

Updated

The pound continues to weaken against the dollar as the US currency benefits from talk of an interest rate rise in December after all, despite the shock US election result.

Sterling has extended its falls and is now down 1.17% at $1.2450. But against the euro, the pound is holding steady, up 0.09% at €1.1622.

Wall Street hits new peak

US markets are on the rise at the open, with the Dow Jones Industrial Average reaching a new record high - just two trading days after the previous peak.

The Dow is currently up around 45 points or o.24% at 18893, having reached 18,918, ahead of the previous record of 18,873 hit last Thursday, as equities continued to welcome Donald Trump’s election victory, even if bond markets do not.

The S&P 500 opened up 0.21% while the Nasdaq composite added 0.15% initially.

Summary: Bond yields jump as market rout intensifies

Time for a quick catch up.

The bond market has suffered fresh losses today as investors rapidly adjust to the prospect of Donald Trump taking control of the world’s largest economy.

Debt prices have fallen sharply again, adding to last week’s $1trn bloodbath, on the prospect that we’re entering a world of higher inflation, interest rate hikes, political uncertainty and possibly trade disputes too.

The selloff has hit US bond prices. The yield on 10-year Treasury bills has hit its highest level since January, rising to 2.23% from 2.1% last week.

Shorter-dated two-year debt, and long-dated 30-year bonds, also hit their weakest points since the start of the year.

Investors are betting that Trump’s infrastructure programme, and his plan to cut taxes, will reflate the US economy.

Paul Sirani, chief market analyst at Xtrade, believes the bond market selloff could intensify:

“The sentiment surrounding a rate hike has been flip-flopping and that only makes bond buying, especially at around the 1% mark for two-year bills, a more appealing proposition.

“President Trump’s pledge to pile resources into infrastructure to ‘Make America Great Again’ has arguably upped the risk of investing in Treasury yields. The 11-month high of 1% might not be the high water mark for 2016 as Trump’s economic policy is put into action.”

[remember: bond yield rise when price fall]

UK borrowing costs are also being driven up. The 10-year gilt yield has hit its highest level since May, at 1.45%.

The dollar is strengthening, hitting an 11-month high against the euro, and against a broad basket of currencies. It’s also gained one cent against the UK pound, at around $1.25.

And the markets reckon that the Federal Reserve is nailed on to raise US interest rates in December:

But....a string of experts are voicing concern about Trumponomics:

Over the weekend, Trump started to step back from some of his more extreme positions.

That wall between America and Mexico might be downgraded to a mere fence, in places, for example.

And investors find that sort of u-turn encouraging, says Naeem Aslam of Think Markets:

Markets are showing that investors continue to believe the fiscal policy plans by Mr Trump and they want to pile their bets in equities. A risk on trade has become the famous trade amid traders and hence for the past week, since Trump’s victory, we are seeing the precious metal along with other safe haven like the Japanese yen selling off sharply.

Mr Trump has delivered many watered down versions of his controversial views over the weekend. This has restored further confidence that the person in charge of the biggest economy of the world, has started to think more logically.

It is this certainty which investors are applauding.

However... appointing the head of far-right website Breitbart as “chief strategist and senior counselor” doesn’t suggest Trump is backing away from the view that appalled liberal critics.

Donald Trump’s shock win is an alarm call to moderate politicians to improve workers’ conditions, argues the head of the International Labour Organisation.

Guy Ryder believes that the US election result, and the Brexit vote, show that many workers feel sidelined and ‘dispossessed’ in today’s economy:

He tells us:

“The societies we all live in are distributing the benefits of globalisation and economic processes extraordinarily unfairly and people think they are getting a raw deal.

“It is the people who feel they haven’t benefited from globalisation and from the EU, from the way things are organised. This is the revolt of the dispossessed in that regard.”

Ryder was speaking as the ILO launches a new report, showing that temporary work, agency work, precarious self-employment and other non-standard forms of employment have all spread.

We now have a hat-trick of warnings about Donald Trump’s economic plans.

George Magnus, the former chief economist of UBS, is very concerned that the next president could kick off a trade war that harms America’s economy, and the rest of the world too.

In a new blogpost, Magnus writes:

Trump’s vehemently anti-free trade rhetoric has included the threat to rip up or change NAFTA, the North American Free Trade Association agreement, including the possibility of levying tariffs on Mexico, and this, on top of erecting the wall, or otherwise restricting immigration. He has threatened China with heavy tariffs as a punitive measure for the now redundant charge of manipulating its currency, and opposes the Trans-Pacific Partnership (TPP) trade agreement that was central to President Obama’s pivot to Asia. Even now, China is busy trying to get Asia-Pacific countries to sign up to the Regional Comprehensive Economic Partnership, its own version of America’s TPP.

If Trump proved to be a real isolationist and walked away from open trading agreements, and imposed trade barriers, he might imagine this that would protect American workers and bring jobs home. But empirically we know this just tends to lead to retailation, higher inflation and costs, and job losses. We do have cause to worry that without America to defend and promote a liberal global trade and investment regime, economic damage and impoverishment would spread through the global economy.

Magnus does believe that America would benefit from targeted infrastructure spending plan, but he’s less impressed by Trump’s tax cuts, as they’ll mainly benefit the better off.

And the other BIG worry is that Trump could drives up the US national debt to alarming levels.

Magnus says:

The other major concern about Trumponomics is about a mishandled fiscal expansion and unfunded tax cuts that would entail a substantially wider fiscal deficit and more rapid expansion of public debt. The bipartisan and independent Committee for a Responsible Federal Budget has calculated that what little we know of Trump’s programmes, including repeal of Obamacare, could put about $3-4 trillion on to the outstanding level of public debt, now standing at $14 trilion. By 2026, Federal debt would rise from 80 to over 105 per cent of GDP. increasing the US ratio of debt to GDP from about 77 per cent to at least 105 per cent. Once debt levels exceed 90-100 per cent of GDP, economic growth becomes seriously impaired.

The major risk then is that after an initial economic boost, the US becomes mired again in rising public deficits – remember debt will be rising anyway in the 2020’s because of medicare and social security spending. Since the external deficit would probably deteriorate as well, the likelihood is that economic instability, higher inflation and interest rates, a falling currency, and then an economic downturn might ensue. And if Trump is keen to push for de-regulation, including of banking and finance, that instability might be accentuated.

The early rally in European stock markets is fading, as City traders look nervously over to America.

The main indices have dipped, having jumped 1% early this morning.

Updated

Bloomberg’s healthcheck on the global financial markets is a pounding mass of red right now:

Each column shows how an asset class has performed. So from left to right, you can see that

  • Most emerging economy’s equity markets have fallen today as investors dump shares.
  • Most currencies have fallen against the US dollar today, including the yen, euro and Turkish lira
  • There have been heavy losses across the government bond markets today, both in developed and emerging economies
  • The cost of insuring those bonds against default, using a credit default swap, has risen (showing that investors see government debt as riskier)
  • But the prices of iron ore, zinc and lead have risen

City skyline and Interstate in Houston, Texas.
City skyline and Interstate in Houston, Texas. Photograph: Alamy Stock Photo

Former US Treasury secretary Larry Summers shares JP Morgan’s concerns about Trump’s infrastructure investment plan.

Writing in the Financial Times, Summers argues that the scheme won’t address the parts of America that most need improving, won’t get key private sector investors involved, and risks pushing borrowing to dangerous levels:

Summers argues:

Unfortunately, the plan presented by his advisers, Peter Navarro and Wilbur Ross, suggests an approach based on tax credits for equity investment and total private sector participation that will not cover the most important projects, not reach many of the most important investors, and involve substantial mis-targeting of public resources.

Many of the highest return infrastructure investments — such as improving roads, repairing 60,000 structurally deficient bridges, upgrading schools or modernising the air traffic control system — do not generate a commercial return and so are excluded from his plan. Nor can the non-taxable pension funds, endowments and sovereign wealth funds that are the most promising sources of capital for infrastructure take advantage of the program.

I am optimistic regarding the efficacy of fiscal expansion. But any responsible economist has to recognise that, past a point, it can lead to some combination of excessive foreign borrowing, inflation and even financial crisis.

Here’s the full piece:

A badly designed US stimulus will only hurt the working class

Summers, of course, has been urging Western politicians to spend more on infrastructure projects for years, so his opposition is a slight surprise....

JP Morgan: Trump's stimulus plan would be dangerous

Donald Trump’s plan to boost US economic growth by rebuilding the nation’s infrastructure is dangerous and unnecessary, claims JP Morgan’s chief global strategist, David Kelly.

In a new note to clients, Kelly argues that the US economy is not under-performing at present, and wouldn’t be helped by a large debt-fuelled stimulus.

Kelly is also concerned that Trump’s proposed tax cut plans would send the national debt clock up to 100% of national output.

First, the federal budget is already dangerously out of balance. Second, the economy is already at full employment so that stimulus applied now is more likely to stoke higher inflation and interest rates than greater real GDP growth.

The federal deficit is already rising, growing from 2.5% of GDP in fiscal 2015 to 3.2% of GDP in fiscal 2016. The Congressional Budget Office estimates that, under current law, the national debt will grow from 77% of GDP in fiscal 2016 to 86% in fiscal 2026.

However, in a September analysis of President-elect Trump’s fiscal plans, the Committee for a Responsible Federal Budget estimated that they would push the debt to 105% of GDP by 2026 if fully implemented. Most of the cost of these plans comes from large proposed tax cuts for both corporations and individuals, although increased defense spending also has a sizable impact.

Kelly also points out that the recent surge in government bond yields shows that the plan would be pricy:

It does not take a brilliant mathematician to see that if long-term Treasury rates return to more normal levels, financing this debt will absorb a much greater share of federal revenues over time. In the 50 years before the financial crisis, the average interest rate paid on federal debt was 5.6% but the average debt-to-GDP ratio was just 37%. A 5.6% average interest rate on a debt equal to 105% of GDP would be ruinous.

The truth is boosting the federal debt to these levels is fiscally reckless.

And if that wasn’t enough, Kelly arguses that the wider US economy doesn’t need a stimulus boost right now:

The U.S. economy is, for all intents and purposes, at full employment. The overall unemployment rate is 4.9% - lower than it has been 77% of the time over the past 50 years while the short-term unemployment rate is lower than it has been 98% of the time over the past 50 years.

Trump supporters might question this rosy view of the US economy -- especially in the Rust Belt where manufacturing jobs have been lost and wage growth pegged down.

But... if Kelly’s right, the fiscal stimulus might not actually regenerate America’s economy at all (creating short-term construction work, but not sparking a manufacturing revival).

He concludes:

In this economy, a shock boost to aggregate demand through tax cuts would likely boost inflation and imports more than domestic production, since the U.S. economy is supply-side constrained. Higher inflation and bigger deficits should lead to higher interest rates – particularly if the Federal Reserve perceives inflation risks as having risen and so raises short-term interest rates.

The American economy is more like a healthy tortoise than a sickly hare. Immigration reform designed to increase skilled immigrants or policies that boosted productivity growth might give the economy the ability to run faster. However, in the absence of this kind of supply-side effort, boosting aggregate demand to make the tortoise run faster would mainly result in over-heating.

On your marks!
Hare-raising fiscal outlook means Trump should perhaps resist shelling out on new highways. Photograph: Gk Hart/vikki Hart/Getty Images

Updated

Italian bonds are also weakening today, with long-term yields hitting their highest in 16 months.

Italy could be the next country to suffer a political earthquake, if prime minister Matteo Renzi loses his constitutional reforms referendum next month.

Renzi hinted this morning that he might quit if the public reject the proposal to reform the Senate.

Speaking on a radio interview, Renzi declared:

If I have to stay on in parliament and do what everyone else has done before me, that is, to scrape by and just float there, that does not suit me.”

Opinion polls suggest the referendum is close.

The reforms are opposed by the right-wing ant-immigrant Northern League, and the radical eurosceptic Movement Five Star -- who both relish the prospect of inflicting defeat on Renzi (once seen as the man to lead Italy out of years of stagnation and political quicksand).

Just in! The interest rate on short-dated American bonds has hit its highest level since the start of the year.

Two-year US treasury bills are now yielding 1% for the first time since January, as prices are dragged down by the wider bond rout today.

US gilt yield prices
US gilt yield prices Photograph: Bloomberg TV

Most Asian stock markets have fallen today.

They were hit by fears that emerging markets will suffer from a stronger US dollar (luring capital back to America) or trade protectionism.

Hong Kong’s Hang Seng index shed almost 1.4%, finishing the day on (an auspicious?) 22,222.22 points.

Over the weekend, US blogger and portfolio manager Matt Busigin argued that the financial markets are making a serious mistake in their analysis of the looming Trump presidency.

He argues that they’ve focused on the likely results of Trump’s promises, without also factoring in just how much instability America could experience under their new leader.

In his view -- investors should be a lot more risk-averse.

[that’s Nominal GDP - or the real growth rate plus the inflation rate]

If Busigin’s right, we could see a sharp correction if a) investors get nervous, or b) Trump’s administration does indeed struggle.

Many analysts think the global bond rout is only just beginning.

It will take a while for investors to properly adjust their portfolios - especially if they’ve gorged on low-yielding government bonds because they expected many more years of low inflation.

Francesco Garzarelli, co-head of European macro research at Goldman Sachs, has predicted that the yield on America’s 10-year Treasury bills will keep rising:

“The prospect of US fiscal stimulus under the new government has increased our conviction that the US 10-year yield will reach 2.5 per cent in 2017, possibly faster than we earlier assumed.

“Whether Mr Trump’s presidency brings fiscal spending or protectionism, we think either scenario would boost inflation.”

[reminder, the 10-year yield crunched through 2.2% this morning]

The US dollar has hit an 11-month high against a basket of other currencies this morning.

Fiona Cincotta of City Index says the greenback is going from “strength to strength”, amid predictions that US interest rates will rise faster than previously expected.

A Trump win had initially cast doubt on the probability of a rate increase in December, with the markets pricing in just a 50% chance of a hike on election night; however, this has since rebounded back.

With unemployment historically low and Trump’s heavy spending plans taking shape, inflation could well charge higher more quickly than initially forecast.

Two rate rises had been pencilled in for next year, but if Trump decides to front load his spending then we could expect more rises through the year, resulting in the dollar pushing further northwards.

The moon rises over Frankfurt am Main, Germany, this morning
The moon rises over Frankfurt am Main, Germany, this morning Photograph: Frank Rumpenhorst/EPA

Germany’s long-term borrowing costs are also rising today, as the global bond market suffers from “Trumpflation” worries.

It’s another sign that investors are shifting money out of government bonds and into other assets.

Reuters has a good take:

German 30-year bond yields broke through 1% for the first time in more than six months on Monday, as investors dumped bonds on bets that the policies of U.S. President-elect Donald Trump will push up inflation.

In a broad debt market sell-off, Italian 10-year yields broke above 2% for the first time since September 2015and U.S. 30-year yields topped 3% for the first time since January.

German 10-year yields -- the euro zone benchmark -- rose to their highest since January, extending their biggest weekly rise this year after Republican Trump unexpectedly defeated Democrat rival Hillary Clinton in the U.S. presidential race.

“It is a continuation of this recent trend. There are still these expectations that inflation could go up if the U.S. takes a more expansionary fiscal stance,” DZ Bank strategist Daniel Lenz said.

Updated

Euro hits nine-month low against the dollar

The US dollar is strengthening this morning, hitting €1.075 against the euro.

That’s its highest level since January.

On the one hand, the dollar is benefitting from the prospect of higher American interest rates.

On the other, concerns of rising populism and political crises in Europe has been undermining the euro in recent weeks.

The pound has also lost ground against the dollar, dropping one cent below $1.25 (which has helped to push the FTSE 100 index up).

Its shares 1, bonds 0 this morning.

European shares are all rallying in early trading, led by financial stocks and mining companies.

In London, the FTSE 100 has gained 82 points to 6814. House builder Taylor Wimpey is doing well, up 4% after reporting that the Brexit vote hasn’t hurt trading.

Barclays is up 3%. Banks should benefit if interest rates rise to calm inflation.

And commodity prices are also benefitting from the prospect of a new US fiscal splurge (Trump will need a lot of copper and iron ore to rebuild America’s infrastructure), so Anglo American and BHP Billiton have gained 2%.

Europe’s stock market this morning
Europe’s stock markets this morning Photograph: Thomson Reuters

Updated

US bond prices are also falling this morning, driven by expectations that Trump’s promised policies would drive up inflation.

The yield on 10-year Treasury bills has jumped to 2.23%, from 2.13% on Thursday night [the market was closed on Friday for Veterans Day].

That’s the highest level since January, and quite a substantial move, underlining how assets are being rapidly repriced...

Updated

UK gilt yields hit near six-month high

Government bonds are being hit hard in early trading as investors pick up where they left off last week.

The prices of US and European government sovereign debt are falling sharply, following last week’s selloff which wiped $1 trillion dollars off bond prices.

The move is being driven by concerns that Donald Trump’s plans for a debt-fuelled stimulus programme, and hefty tax cuts for richer Americans, will drive inflation up.

The yield (or interest rate) on UK 10-year government debt has jumped over 1.42% this morning, up from 1.36% on Friday night. That’s the highest yield since the end of May, before the Brexit vote.

The yield on UK 10-year gilts
The yield on UK 10-year gilts (yields rise when prices fall) Photograph: Thomson Reuters

German bonds are also being driven down from their recent record highs. The yield on benchmark 10-year bunds hit a nine-month high this morning at 0.35%

These moves mean that any investors who bought bonds before last week’s selloff are facing losses. They also indicate that governments must pay a higher interest rate when they sell bonds in the market to fund their deficits (compared to a few weeks ago).

Bloomberg are calling it a ‘global bond rout’, saying:

A global bond rout is intensifying, sending U.S. 30-year yields above 3 percent for the first time since January, on speculation Donald Trump will increase spending to boost the world’s largest economy.

Updated

The agenda: Investors wake up to a Trump world

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

November is typically a time for investors to reflect about what went right, and wrong, that year and to ponder what might be coming next. And after the US elections last week, City experts have a lot of rethinking to do.

Donald Trump’s victory, so soon after the Brexit vote, has shaken many of the old certainties that have underpinned investment strategies for years.

Inflation is back in town, as the president-elect plots a financial stimulus programme that could sent America’s national debt spiralling (even) higher and force inflation out of its rut.

And free trade is looking vulnerable too, with China threatening to hit American imports unless the next leader of the free world reins himself in:

All of a sudden, putting one’s clients’ money into government bonds at record high prices (and thus record low returns), may not feel like such a smart move.

Eric Peters, the boss of One River Management, talked about the shock of waking up in ‘Trump world” in his latest note to clients:

That’s why we saw bond prices slide last week, as people moved swiftly to reposition themselves. We’ll probably see more significant shifts in asset prices this week.

Also coming up today....

Japan has smashed expectations overnight, by reporting that its economy grew at an annualised rate of 2.2% in the last quarter. That’s much better than the 0.9% which economists expected.

The recovery was due to a jump in exports, so could be vulnerable if the global economy deteriorates. I’ll mop up some reaction shortly.

And UK housebuilder Taylor Wimpey and bookmaker William Hill are both reporting financial results, so we’ll watch for any interesting angles there too.

Updated

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