Conciliatory Speech by Donald Trump Helps Market Concerns
Nov 10 2016 by Johnny Bowman
Still he predicted volatile equity markets until year-end as the world waits until January's inauguration for more concrete details of what a Trump presidency means.
Speaking to brokers, the Wall Street Journal compares the volatility to what happened as markets came to terms with the United Kingdom's vote to exit the European Union.
About the only victor amidst the turbulence was gold - seen as a safe haven in times of uncertainty - which soared 4.7 per cent.
"Investors moved into complete "risk off" mode".
Of course, it is worth remembering that financial markets are now pricing in a Trump victory, perhaps prematurely.
Prices fell on benchmark 10-year Treasury notes and 30-year bonds, pushing yields to their highest levels in 10 months, as investors expected Trump to enact protectionist trade policies that would put upward pressure on USA wages and boost inflation.
A Trump presidency is seen likely to bring added uncertainty on various issues, including trade policies. Dow futures are 1.7 percent lower at 17,974 while the broader S&P 500 futures were down 1.8 percent at 2,097. Some of the early losses were pared, but the flight to safe-haven trades remained undeterred.
Hong Kong's Hang Seng Index plunged 1.95 per cent at 22,462.8 after losing as much as 4.15 per cent.
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Benchmarks in Taiwan, Singapore, the Philippines and Indonesia also lost ground.
European markets are still wary about Trump's promises including doubling economic growth, explained Dr Yueh. The slide began shortly after 10 pm EST when Trump was awarded Florida and OH, two of the key battleground states. In early results, Trump the Republican and Clinton the Democrat scored in their expected strongholds.
The Trump strength in this election is similar to what happened during the surprise Brexit vote, which was characterized by untrustworthy polls, rising populism and an angry electorate.
"Rightly or wrongly, markets are going to be concerned about a Trump victory, particularly given the potential consequences for world trade and its impact on many large companies in the USA stock market", said Ric Spooner, chief analyst at CMC Markets in Sydney. The Mexican peso likewise tumbled and investors looking for safe assets bid up the price of gold. The peso rallied almost 1.4 percent on Tuesday before official election results began to be released as the market bet Clinton would win. The Dow's earlier level would also challenge the record one-day plunge of 777.68 points back on September 29, 2008, during the financial crisis.
The euro was at US$1.0937 against US$1.0914 in NY, having touched US$1.13 earlier on Wednesday in Tokyo. The dollar was at 19.80 pesos, having spiked at 20.78 in Asia the previous day.
Trump's threats to rip up a free trade agreement with Mexico and tax money sent home by migrants to pay for building a wall on the southern U.S. border once elected president have made the peso particularly reactive to events in the race for the White House.
"Very hard times are coming to Mexico", said analyst Gabriela Siller of Mexican bank BASE.
Energy markets were also roiled. The market-implied chance of a December rate hike by the Federal Reserve plunged to 47 percent, based on USA overnight indexed swaps that trade 24 hours a day, compared to 82 percent at 5 p.m. Brent crude oil was up 7 cents at US$46.11 a barrel, after falling to US$44.40, its lowest in about two months. Brent crude, used to price worldwide oils, was down 14 cents at $45.90 a barrel in London.