Markets Slip as Trump's Startling Victory Unnerves Investors
November 09 2016 - 5:10AM
Dow Jones News
Donald Trump's surprise victory in the U.S. presidential race
upended global markets early Wednesday, concluding one of the most
divisive and unpredictable campaigns on record.
Stocks around the world quickly sold off, gold soared and the
dollar fell sharply as Donald Trump defeated Hillary Clinton to
become the 45th president of the U.S.
Financial markets weren't prepared.
As Mr. Trump took to the stage and vowed to begin the "urgent
task of rebuilding our nation and renewing the American dream,"
risk assets initially set out on their steepest decline in months,
before recovering many of those losses during early European
trading hours.
"There is a bit of surprise, moderated panic even," said Nandini
Ramakrishnan, global strategist at J.P. Morgan Asset Management.
"We knew more or less what we were going to get with Clinton—a
little bit less is certain about Trump."
Investors had largely counted on a narrow victory by Democratic
candidate Hillary Clinton, who had been consistently leading in
polls and betting markets right until roughly 9 p.m. Eastern time
on Tuesday as polling results came in.
"The polls were wrong, but this time on the election of the
president of the largest economy in the world," said Jordan
Rochester, strategist at Nomura.
S&P 500 futures had tumbled as much as 5% as the polls
pointed to a likely surprise victory for Mr. Trump, triggering a
circuit breaker until U.S. markets open again. Brent crude oil shed
over 3% as risk assets sold off, while gold climbed as much as 5%
in a flight to safety before paring gains.
The yield on the 10-year Treasury note fell quickly from 1.896%
to as low as 1.720% before recovering.
Global investors took note.
Japan's Nikkei Stock Average shed 5.4%, its biggest loss since
Britain's June referendum, as the dollar fell to as low as ¥
101.1940 against the yen.
European markets initially opened with a thud, as German's DAX
shed 2.7% while markets in Spain and Italy shed over 3%. The
export-heavy auto sector fared worse in the Stoxx Europe 600,
shedding over 3% as the euro rose 0.9% against the dollar to
$1.1115.
"When I felt the chances of Trump winning were increasing, I
rushed into the office to warn clients," said James Butterfill,
head of research and investment strategy at ETF Securities in
London.
"We're worried of the geopolitical implications," he said, as
well as what it means for the Federal Reserve and rising populist
movements across Europe.
Losses in Europe began to moderate shortly after markets opened,
with the Stoxx Europe 600 trading down just 0.8% midmorning, while
S&P futures pared declines to 1.8%. Gains in gold eased.
Investors were also beginning to question the Federal Reserve's
plans to raise interest rates in December, betting that a period of
market turmoil following the surprise election result could keep
the central bank on hold.
The WSJ Dollar Index fell sharply but recovered to trade flat
after European markets opened.
The Mexican peso, which had moved closely in line with Mr.
Trump's polling success during the election campaign, fell as much
as 11% against the dollar before recovering to trade down 7.3%.
The move in the peso was particularly noteworthy on the trading
floor of Mizuho Financial Group Inc.'s Americas unit in midtown
Manhattan Tuesday night.
"That is a very big move, especially over 3.5 hours," said Dan
Riveira, managing director in foreign-exchange trading at Mizuho
Financial. "The peso is being used as a barometer for the
election."
As the currency's value rapidly flashed in magenta on his
screen, Mr. Riveira said this is the biggest move in the Mexican
peso he can remember.
Chelsey Dulaney contributed to this article.
Write to Riva Gold at riva.gold@wsj.com, Ira Iosebashvili at
ira.iosebashvili@wsj.com and Min Zeng at min.zeng@wsj.com
(END) Dow Jones Newswires
November 09, 2016 04:55 ET (09:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.