Following Trump's election victory, crypto assets, S&P 500, and financial instruments such as the dollar are breaking records.

Crypto assets in particular are where optimism is priced. Investors who think that Trump's new administration will be a great opportunity for the cryptocurrency ecosystem have pushed the Bitcoin price to a new record level. The world's largest cryptocurrency has exceeded the $90,000 level for the first time. This rise came after the Republican Party secured the majority in the House of Representatives. The positive atmosphere in the markets following Trump's election victory is not limited to Bitcoin alone. Musk's Tesla, crypto exchange Coinbase, and the US payday brokerage Robinhood are also among the instruments that are priced positively. Meanwhile, according to CoinGecko, the total value of the global crypto market has exceeded the $3 trillion level for the first time in three years. The negative pricing of Trump-trade is taking place in Asian markets and the Euro exchange rate.

The Euro/Dollar parity tested below 1.06 yesterday, falling to its lowest level since April. Europe, whose economy is already fragile, is also very vulnerable to possible Trump tariffs. Therefore, interest in European assets is decreasing. Another negative pricing is in Asian stock markets. Asian markets fell yesterday due to increasing concerns about the possibility of a new trade war between China and the US, and the disappointment that additional measures were not taken to stimulate the Chinese economy. Trump promised to impose high tariffs of up to 60% on goods imported to the US, especially products from China, during his election campaign.

US Federal Reserve (Fed) Chairman Jay Powell, drawing attention to the strong performance of the US economy and the progress made in inflation, stated that there is no need to rush to cut interest rates.

Following Powell’s speech, which was perceived as ‘hawkish’, the yield on two-year Treasury bonds rose to 4.36%. Market pricing indicates a 60% probability of a quarter-point rate cut in December. The Fed had lowered its policy rate by a quarter point last week to a range of 4.25-4.75% and plans to make another cut in December.

October 2024 inflation data was announced in the US. The Consumer Price Index (CPI) increased by 0.2% on a monthly basis and 2.6% on an annual basis, in line with market expectations. The core CPI, which excludes energy and food prices, increased by 0.3% monthly and 3.3% annually in October; these data also coincided with expectations.

Deutsche Bank’s FX research unit has prepared a comprehensive study analyzing the impact of potential new trade wars during the Trump era.

According to this analysis, the global impact of the US’s new tariffs will directly affect many countries. However, the country expected to be most directly affected is not China. However, the secondary decisions to be taken by the World Trade Organization (WTO) and the European Union (EU) in parallel with the increase in US tariffs pose a serious risk for China.

The three countries expected to be most affected are Vietnam, Malaysia and Thailand.

The European Union (EU) is making a policy change aimed at increasing defense and security spending amid pressure from Russia’s attack on Ukraine and Donald Trump’s possible return to the White House.

With this change, around a third of the EU budget between 2021 and 2027, 392 billion euros, will be directed to defense industry and military infrastructure projects, as well as reducing economic inequality. It is planned that 20% of this new budget will be allocated to defense spending. Current rules prohibit these funds from being used directly to purchase defense equipment, but allow investments in “dual-purpose” products such as drones.

Following Russia’s attack on Ukraine in particular, EU countries on its eastern border are calling for more funding to support increased military spending. Countries such as Poland and Lithuania are increasing their defense budgets and are welcoming the diversion of EU funds to these areas.

Natural gas prices in Europe are heading toward their highest levels of 2024 as the first cold snap of winter reaches northern Europe and below-normal temperatures are expected.

December 2024 TTF futures have risen to €46/MWh, up nearly 13% since the beginning of the month. This is the highest level for August 2024 contracts this year. Frost is expected to hit northern Europe this week, as a cold snap is expected to hit, and heating demand is expected to increase.

In addition, demand for natural gas-fired power plants is expected to increase due to lower production levels from renewable energy sources.

The International Energy Agency (IEA) predicts that global oil markets will face a supply surplus of over 1 million barrels per day next year. It is stated that this supply surplus can stabilize prices due to the decline in demand in China and ease the impact of tensions in the Middle East on the market.

According to the IEA report, China's oil consumption has been shrinking for 6 months. It is noted that there is a risk that the supply surplus will grow even more if OPEC+ increases production. The IEA predicts that the widening supply-demand balance can bring some stability to the market, which has been fluctuating due to factors such as the pandemic, the Ukraine war and the conflicts in the Middle East. While demand growth is slowing, supply from producing countries such as the US, Brazil, Canada and Guyana is expected to increase by 1.5 million barrels per day in 2024 and 2025. Therefore, even if OPEC+ does not ease production cuts, it is highly likely that supply will exceed demand.

OPEC+ plans to increase production again, which has been restricted since 2022, but this step has been postponed twice due to the sensitive nature of the market. OPEC, which plans to start the production increase process with a gradual increase of 180 thousand barrels per day in January, will meet on December 1 to review the situation.

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