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The nomination of Scott Bessent as Treasury secretary on Monday eased investor fears over President-elect Donald Trump’s trade tariff plans, sending the dollar lower and the Treasury rebounding.
The dollar index, which tracks a basket of currencies including the pound and yen, was down 0.5% by midday in New York, having previously fallen as much as 1%. The euro rose 0.6% against the US currency.
The dollar index rose more than 7% from early last month through Friday as the main beneficiary of the so-called Trump deal, which was based on expectations that Republican tariffs and tax cuts would boost inflation and put upward pressure on the United States. interest rate.
But the selection of Bessent, who last month described steep tariffs as a “maximalist” position, is seen by investors as a sign that the next president’s policies may be loosened.
Earlier this month, Bessent told CNBC he recommended “gradually escalating” tariffs to reduce the risk of market shocks.
“It’s good for markets to have at least one strong supporter of opposition to a permanent business tax at the cabinet table,” said Paul Donovan, chief economist at UBS Global Wealth Management.
U.S. stocks rose, with the blue-chip S&P 500 up 0.1%.
The small-cap-heavy Russell 2000 index rose more than 2% on the bullish rally, surpassing its 2021 high and hitting a new all-time high.
Thierry Wiseman, global currency and rates strategist at Macquarie, said the president-elect’s choice of Bessent “seems to signal that President Trump intends to use tariffs transactionally rather than as tariffs.” said. . . Punitively.”
U.S. Treasuries, which had been sold on the prospect of inflationary pressures, rebounded. The yield on the 10-year U.S. Treasury note fell 0.11 percentage points to 4.3%, as U.S. Treasuries had their best day of the year. Yields move inversely with prices.
“Everyone has been supporting ‘America First,’ but I think they’re starting to understand that this is not a unilateral demand,” said Hugh Ginber, global market strategist at JPMorgan Asset Management.
He added that the incoming administration is “talking about using the US dollar as a more strategic tool” to achieve its goals.
Vincent Chanot, head of research at Generali Asset Management, said Bessent’s nomination signals that Trump may not go “all in” on the most inflation-inducing policies, such as tariffs. Ta.
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Investors are hoping that Mr. Bessent, a hedge fund manager responsible for implementing President Trump’s economic policies, may also help curb the expansion of the budget deficit.
Trump supporter Elon Musk had previously opposed the nomination, calling it “business as usual.”
In Europe, the Stoxx Europe 600 ended 0.1% higher and Britain’s FTSE 100 rose 0.4%. European stocks have underperformed U.S. markets since the presidential election, amid concerns that tariffs would hurt the region’s economy and exporters.
The United States’ major trading partners in Asia were heartened by news of the appointment. Japan’s Nikkei Stock Average, which has a lot of exports, and South Korea’s Kospi Index both ended the day up by 1.3%.
MUFG analysts said Bessent had “in the past suggested the possibility of a more balanced approach to implementing trade tariffs.”
But they cautioned against reading too much into the nomination, saying the Treasury Secretary “is not the person to design the details of a strategy for implementing trade tariffs.”
