European stock markets fall after a major selloff in Asia as US election shocks the financial world
Our latest summary: Markets recover from Trump slump
Drugs firms jump as pricing clampdown looks unlikely
Expert: Trump reassures markets with presidential speech
Summary: Asian markets slumped overnight
Financial experts fear global instability
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Derry Pickford, co-head of asset allocation at City firm Ashburton Investments, predicts that Donald Trump will face big clashes with Congress, even though the Republicans will control both the lower house and the Senate.
Given that Trump will nominate the vacant seat on the Supreme Court, this should give the Republicans a huge amount of policy freedom.
Trump is likely to face resistance from his own party and is unlikely to get cooperation from the Democrats after a bitter and acrimonious election.
There is an Italian referendum on constitutional change, a French Presidential election and a Federal election in Germany scheduled within the next 12 months.
An anti-establishment vote, despite what opinion polls say beforehand, should not surprise markets although we believe such victories are still likely to create market volatility given the uncertainty it will create for the policy environment.
Here’s a thought:
Has anyone actually talked about the huge conflict of interest in Trump being President and his policies impacting his company's profits?
We’re still expecting Wall Street to take a dive when trading begins in three hours.
The Dow Jones industrial average is expected to drop by over 374 points, or around 2%.
Dow futures down 300 points, but they had plunged roughly 800 points earlier Wed. $DJIA #Elections2016 https://t.co/D7BWKZivLS pic.twitter.com/kOxTjBQagC
Donald Trump’s victory is boosting shares in three sectors - mining companies, pharmaceuticals groups, and defence firms.
So in London, drugs makers Hikma and Shire are both up by over 7%. That’s because Trump isn’t likely to deliver on Hillary Clinton’s pledge to rein in medical prices.
Sir Martin Sorrell, the founder and CEO of advertising giant WPP, tells us that the Trump election is “effectively a second Brexit that leaves many very surprised, including the markets and me”.
It’s going to take a significant amount of time to assess the implications beyond the short term.
Increased levels of uncertainty will mean more hesitation to make important decisions in the short term, both by people and governments. But it may accelerate implementation of helpful reforms in the medium term to reduce uncertainty and stimulate investment as a result.
WPP chief Sir Martin Sorrell says Trump victory is like a "second Brexit" that will increase economic uncertainty
Sorrell adds that he has become a father again on election day with "baby Sorrell" born in New York. Pollsters get that one?
More on the recovery in European markets after the initial shock. Mike van Dulken, head of research at Accendo Markets, said:
Equity markets are negative, but nowhere near as much as you might expect, as investors digest news of a Trump Presidency. A FTSE 100 close to break even, having rallied 300 points from its overnight lows, and a DAX and DOW nursing what can only be described as minor losses in comparison to all those apocalyptic forecasts, looks a decent outcome.
If anything, what’s happened bears eerily similar hallmarks to Brexit; complacency, surprise and panic followed by swift recovery. If anything it’s happened more quickly this time. Could Trump prove less controversial now all those populist votes have been won? Are there enough positives including an absence of congressional deadlock to help markets back towards their highs?
Time for another recap, after a wild day in the markets (and it’s not even lunchtime in the City yet!).
World financial markets have swung wildly today after Donald Trump stunned the world and beat Hillary Clinton to the White House.
‘Initial stock market reaction to the Trump victory was a short intake of breath, followed by a shrug.
The relationship between the Mexico and the United States is in danger of deteriorating with Mr. Trump promising pre-election to renegotiate terms of trade and attempt to curb immigration from the southern border.”
It didn’t do Hillary Clinton much good, but the US economy is actually in pretty decent shape, with unemployment still low and growth rising in the last quarter.
That’s another reason that the markets aren’t having a complete meltdown today.
Real economic growth has picked up in recent months while the unemployment rate, at 4.9%, is close to any economist’s definition of full employment. S&P500 earnings have rebounded smartly from the oil & dollar induced slump of 2015 and inflation is still moderate.
Moreover, the global economy is also showing signs of life with the global manufacturing PMI index hitting a two year high in October. All of this, absent political uncertainty, would be positive for stocks and negative for bonds.
It should be noted that there is a wide gulf between Mr. Trump’s agenda and that of many “establishment” Republicans and the latter may well balk at unfunded tax cuts or spending increases. In addition, both the new President and Congress will likely act more slowly on dismantling the Affordable Care Act or trade agreements, until some better alternatives can be found.
Trump’s pledge to spend billions of dollars on new infrastructure is helping to calm the markets, says Duncan Weldon of the Resolution Group:
Market reaction: calmer than a few hours ago. And pointing to taking the infra stuff seriously/reflation.
A few hours ago, traders feared that the US election would create a Brexit-style slump in the markets - as Asian shares suffered an almighty tonking.
So far, that isn’t happening, but there’s still a definite move out of risky assets as investors wonder what on earth happens next. The Mexican peso continues to bear the brunt of it, hitting record lows against the dollar today.
“With Donald Trump winning the US election a broad global risk off move is developing, although we’ve not seen the kind of panic that followed the EU referendum, except in isolated instances such as the Mexico Peso
Safe havens are well bid, especially the Japanese Yen alongside fixed income and gold.
If you’re just tuning in, here’s the election result that has shocked the world:
Related: US elections 2016 live results: track who is winning, county by county
City investors might be coming to terms with a Trump presidency, but many commentators are extremely alarmed about the implications of the Republican’s victory.
Our colleague Jonathan Freedland has already delivered a devastating critique of the situation:
We thought the United States would step back from the abyss. We believed, and the polls led us to feel sure, that Americans would not, in the end, hand the most powerful office on earth to an unstable bigot, sexual predator and compulsive liar.
People all around the world had watched and waited, through the consecutive horrors of the 2016 election campaign, believing the Trump nightmare would eventually pass. But today the United States – the country that had, from its birth, seen itself as a beacon that would inspire the world, a society that praised itself as “the last best hope of earth”, the nation that had seemed to be bending the arc of history towards justice, as Barack Obama so memorably put it on this same morning eight years ago – has stepped into the abyss.
Related: The US has elected its most dangerous leader. We all have plenty to fear | Jonathan Freedland
European markets continue to regain ground after sharp losses at the open. The FTSE 100 is almost flat, while Dax and CAC are down just 0.8%
Crumbs... the FTSE 100 just erased all its early losses, and was briefly UP 2 points.
#FTSE100 flirts with a breakeven recovery. Brexit: Part deux
Here’s a clip of Donald Trump’s victory speech:
“It’s a movement comprised of Americans of all races, religions, backgrounds and beliefs." @realDonaldTrump delivers his victory speech pic.twitter.com/niXLQVKXMl
The first speech by President elect Trump has had a calming effect on the markets, says Kathleen Brooks of City Index.
She reckons that Trump “definitely sounded more Presidential than he has done at any stage during the election campaign” (not a Herculean task, to be honest)
In fact, one could argue that this outsider has delivered an establishment-style victory speech, which is soothing stressed markets.
Could the markets be hoping that 1, Trump won’t be as bad a President as they thought he would be less than 24 hours ago? 2, That he may actually be more establishment and less maverick than he portrayed himself throughout the campaign? At this stage we can’t answer these questions, but they give the markets lots to ponder today.
The yield, or interest rate, on US government debt is rising this morning after an overnight slide.
That means two things.
US yields bounce back as Trump bigs up infrastructure spend #USElections pic.twitter.com/40vKBCTglB
Trump’s victory may not be the end of this upheaval in global politics, says Jim Leaviss, head of retail fixed interest at M&G Investments:
The big implication for investors of what happened last night is this: with no income growth for most populations in developed world economies since the Great Financial Crisis (with the exception of the 1%), the established parties and candidates are being heavily punished in elections.
It doesn’t stop here – we have a referendum on the Italian constitution next month, and many more European elections in 2017 (could Marine Le Pen be elected President in France?). I saw a statistic this morning where across the G7, 65% of parents believe their children will be worse off than they are. Having seen the electoral shifts in the UK with Brexit and now the US, do established political parties react by promising significant fiscal expansions? Could last night’s vote trigger the end of global austerity?
If over the weekend someone had said Trump will win, who would have predicted the FTSE100 would be 100 points higher than Friday's close?
Alex Edwards, currency analyst at UKForex, reports that the US dollar is recovering from its overnight slide, following Trump’s acceptance speech:
His appeasing tone has definitely helped. It wasn’t quite the reaction we were expecting, although European equity markets are all taking a hit early in trading.
“Investors and traders are still trying to get their heads around the official result, and there’s a lot of trepidation out there. Spreads are wide and we still expect to see some big moves in the currency markets as the day goes on.”
"Sterling loses its Trump hump" says @World_First pic.twitter.com/JRClya0oR2
Trump’s victory speech isn’t enough to prevent some European markets suffering their biggest selloff since the Brexit shock:
Europe's shares fall by most since aftermath of Brexit vote following #Trump's win https://t.co/vrbc81o0qR pic.twitter.com/MCry6DyrHG
Volatility is absolutely rampant this morning as investors try to get to grips with Trump’s sensational victory.
As this chart shows, the FTSE 100 slumped by 140 points (2%) at the open, before romping back during Donald Trump’s victory speech.
#Germany's Dax trims losses after first Trump shock. Now down only 1.7%. pic.twitter.com/9EIWfT34Vq
There are three key areas the markets will be looking at in the wake of Donald Trump’s victory, says George Saravelos of Deutsche Bank:
Trump rhetoric. Does the potential president-elect sound “presidential”? Are there signs of moderation in policy, particularly its most controversial aspects on foreign policy? How quickly do we find out about presidential appointments, to the post of Treasury secretary in particular, and are they credible?
Data. There is an unambiguous rise in policy uncertainty and the key question is how much does this impact near-term US and global growth. Both the Fed and the markets will be closely scrutinizing upcoming releases, but we will have to wait until the week of November 21st for the first business confidence surveys (Markit PMI).
Chair Yellen. It is reasonable to assume that the Fed may put December rate hike preparations on hold until more clarity is reached on the data, but even more importantly the market will be looking for confirmation that Chair Yellen will not resign. Trump has been particularly critical of her term so policy continuity will be particularly important.
There is a clear tension between the negative impact of lower Fed expectations, higher uncertainty and risk premium on US assets compared to the positive implications of Trump’s fiscal and corporate tax programs on growth and corporate tax repatriation. We view the impact as unambiguously negative for emerging market currencies against the dollar. Risk-aversion near-term but prospects of higher US yields medium-term both work against EM. The big rise in EM inflows over recent months paints a worrying backdrop. For developed market currencies the tension between lower Fed expectations near-term but a more positive fiscal story medium-term is balanced enough to keep our forecasts and medium-term dollar bullish outlook unchanged. The one exception to our dollar positive forecasts is dollar/yen where we view both the Asian geopolitical and risk-aversion impact as sufficiently strong to re-enforce our conviction on our year-end target of 94.
Donald Trump’s victory speech has helped sentiment in the City.
His pledge to serve all the American people, rebuild the nation’s infrastructure, double the growth rate and “do a great job” have all brought some calm to the markets after a very volatile night.
“It’s because he sounded more presidential, there was no mention of ‘lock her up” or ‘build a wall’. It was all, dare I say it, presidential”,
Trump's speech has helped contain the FTSE 100's fall, down around 1% after being indicated to be 3% down
Shares in two precious metals producers, Fresnillo and Rangold, are soaring - propping up the FTSE 100.
Pharmaceutical shares however are on the rise in the FTSE 100, with Shire, Hikma, GlaxoSmithkline and AstraZeneca all up between 2% and nearly 5%.
The sector has always been perceived as a defensive one in times of uncertainty - and this certainly counts - but more significantly, they may not face the price cuts which Hillary Clinton had promised to implement if she won.
And we’re off! The London stock market has tumbled by almost 2% at the start of trading, in a heavy selloff.
But it’s not a Brexit-style rout, or a Black Monday-ish crash.
City investors are gathering around screens to watch Donald Trump give his victory speech, as they prepare for a messy start to trading.
Trump is promising to be the president for ‘all Americans’, and to reach out to those who didn’t support him. He’s also vowing to use his business experience to help the US, and pledging a major new infrastructure spending plan to boost the economy.
Dollar strengthening against major currencies as Trump speaks says @World_First on his conciliatory tone
Trump keeping to the autocue in this speech. He realises how important this moment is
Related: US election 2016: Donald Trump declared winner in shock result – live
Saker Nusseibeh, chief executive at Hermes Investment Management, says a Trump presidency will probably be bad for America’s long-term growth prospects.
He writes that Trump’s foreign policy agenda is a particular risk:
Trump might create market volatility through his pronouncements in the field of foreign policy, traditionally a preserve for presidential authority. The assumption is that Trump will listen to advice from professionals in the US State Department when dealing with foreign affairs, but on the campaign trail he demonstrated a clear willingness to dismiss professional advice, to the delight of his support base.
Once again it is not a stretch to imagine Trump in talking to his home constituency might alienate the traditionally supportive Gulf nations with his Islamophobic comments. This might then strengthen Iran’s influence in the region, which could threaten regional stability and therefore the oil price. Likewise, Trump’s anti-NATO and pro-Vladimir Putin comments could be taken, if repeated when he is in power, as a green light by the Russian President to intensify his revanchist foreign policy in Eastern Europe. This in turn could lead to rising risk premia for European assets.
Associated Press have called the election for Donald Trump.
Here is it: Trump elected 45th US president #ElectionNight pic.twitter.com/Zp7YoS1Cqp
Donald Trump shattered expectations on Tuesday with an election night victory that revealed deep anti-establishment anger among American voters and set the world on a journey into the political unknown.
The Republican nominee has achieved one of the most improbable political victories in modern US history, despite a series of controversies that would easily have destroyed other candidacies, extreme policies that have drawn criticism from both sides of the aisle, a record of racist and sexist behaviour, and a lack of conventional political experience.
Related: Donald Trump wins presidential election, plunging US into uncertain future
People should try to stay calm, argues Aberdeen’s Richard Dunbar.
"Now is the time for cool heads" - Aberdeen Asset Management senior investment strategist Richard Dunbar
Dominic Rossi, Global CIO Equities at Fidelity International, has given a very sobering assessment of the situation:
“We are heading into a world of unprecedented political risk which calls into question the pillars of the post WWII settlement. It’s unsurprising investors are heading for cover.
“The immediate sense of bewilderment at the shift rightwards in American politics will need to give way to a more sober risk assessment.
"We are heading into a world of unprecedented political risk" says Fidelity's Dominic Rossi "unsurprising investors are heading for cover"
A Trump victory could force central banks to end their current policy of ultra-loose monetary policy, says Derek Halpenny, European Head of Global Markets Research at MUFG.
Halpenny says they may conclude that buying government debt with new money (quantitative easing, or QE) has reached the end of the road:
“This will no doubt be cited as another example of Brexit – disaffected voters who feel their voice is not being heard and when the dust settles, Central Bankers will in all likelihood conclude that QE and policies that slowdown government reform are part of the problem.
This victory certainly will at some point start to put upward pressure on long-term yields.
The latest word from America is that Hillary Clinton has not conceded defeat.
Campaign chairman John Podesta has just told supporters to go home and get some sleep, while the counting continues.
John Podesta, Clinton campaign chair, speaking now: "They're still counting votes!" https://t.co/RzbUkd3eXs #ElectionNight
Alex Edwards, currency analyst at UKForex, fears an ‘extremely volatile day’, as markets digest the shock US election results:
If Trump is announced president, we expect to see the dollar tank. Markets are still in denial here, but we’re likely to see some very heavy dollar selling later today, through London and New York sessions.
The markets reckon it’s all over, reports Jill Treanor from World First’s offices in London:
Trump's win in Pennsylvania, says @World_First, hasn't moved markets.. Trump victory now "priced in"
Capital Economics fears that a Trump administration will quickly undermine relations with China and Mexico.
Paul Ashworth, their chief US Economist, says that the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership (between the US and the EU) are ‘dead’:
On trade, we expect Trump to start by labelling China a currency manipulator and to bring a number of perceived disputes to the WTO. Tariffs are possible further down the line, but won’t be the first option. He will also insist on renegotiating NAFTA, but it is hard to know what he hopes to achieve.
Given the adverse market reaction we have already seen, the Fed’s planned December rate hike is now off the table. There is a possibility that Fed Chair Janet Yellen and even some other Fed Governors (Lael Brainard??) will resign immediately. Although Trump can’t sack Yellen before her term ends in February 2018, his win demonstrates that many Americans share his view that she has been overtly political. Under those circumstances, she may feel duty-bound to step aside.
Jesus Christ, we have to think about who Donald Trump is going to appoint to run the Federal Reserve.
Donald Trump could be just six (!) electoral college votes away from the Oval Office, with Associated Press declaring that he’s won Pennsylvania.
Our main US election liveblog has the details:
Related: US election 2016: Donald Trump poised to defeat Hillary Clinton – live
The main European stock markets are tipped to plunge by over 4%, mirroring the impending slump in London.
The 2% surge in the euro today will hurt manufacturing firms, adding to general alarm over the US election results:
Our European opening calls:$FTSE 6599 -3.57%
$DAX 10059 -4.04%
$CAC 4290 -4.18%$IBEX 8522 -4.64%$MIB 16069 -4.45%
Whilst it may be only a few hours before we hear confirmation of what we now suspect in terms of this result, it is likely to be longer still before we get more clarity on the policy intentions of Donald Trump.
Aggressive protectionism is probably the greatest threat to US and global growth and financial markets, and more expansionary fiscal policy the greatest opportunity for stronger growth. Exactly what mix of these two opposing policy stances will follow may not be fully clear for months. In the meantime, the Federal Reserve is likely to view the market jitters with dismay - equivalent to a financial market tightening. And the case for a December rate hike from the Fed has diminished substantially.
How does Theresa May's government deal with a Trump administration? Number 10, privately, admit they don’t know him or his people
European stock markets are heading for some very large falls when trading begins in two hours time, in a repeat of the June Brexit meltdown.
“It’s looking like it’s President Trump. This is a complete and utter shock to investors around the world and we will see European stocks sharply lower when trading opens in a few hours.
We currently expect the FTSE to open 270 points lower which is a collapse of close to 4%. We have seen a major flight to safety on a similar level to the Brexit vote and the Mexican Peso has collapsed against the pound as people around the world digest the realisation that Trump is extremely likely to now become President of the United States.”
#Nikkei briefly plunged more than 6%, US markets predicted to open down 4%, #FTSE100 expected to open down 4% pic.twitter.com/T8HBeFVlfi
The Mexican Peso is ploughing fresh record lows against the US dollar and the euro, on fears that a Trump presidency will hurt the Mexican economy hard.
Today’s 13% plunge has pushed the peso below 20 to the $1, in a wave of panic selling.
“There’s a lot of panic in the market, it is definitely an outcome it was not expecting
“The movements are very strong, the market is showing higher risk aversion in search of safe-haven assets.”
Mexican peso pain... Euro-Mexican Peso +15%...record high . $/MXN also at record high #USElection2016 market reaction. pic.twitter.com/qPaQq1NE6E
Asia Pacific has set the tone for what promises to be a dramatic day on the rest of the world’s financial markets. A Trump presidency seems likely to bring a level of uncertainty not seen since the collapse of Lehman Brothers in 2008.
But as I sign off in Sydney and handover to London, here are the main points so far:
Geoffrey Yu, Head of the UK Investment Office at UBS Wealth Management, fears that a Trump victory could herald more shock results in 2017, when France and Germany head to the polls.
He’s also concerned about Janet Yellen’s future under a Trump presidency:
“Lightning appears to have struck twice as Trump is set for an unexpected victory, following the shock Brexit vote earlier in the year. Pollsters, pundits and markets probably need to take stock, figure out how they got 2016 so wrong and what this portends for 2017 as the electoral calendar is also quite crowded.....
“After the dust settles, policy and appointments will matter the most. For markets, what happens to Fed Chair Janet Yellen will be crucial. The impact of her future will be felt globally.”
Japan’s Nikkei has closed for the day (and what a day!), down 5.36% at 16,251 points.
That’s a slump of around 919 points.
Our Australian economics commentator Stephen Koukoulas has had his say about a likely Trump win.
This is the worrying point in a nutshell:
“Make America Great Again”, the slogan from the Trump campaign, involves the US raising barriers to international trade in an effort to protect US industry. If Trump follows through and works to restrict trade, especially with China where the US runs a huge trade deficit, there is a genuine threat that the global economy will stall, perhaps falling back into recession.
Related: Donald Trump as US President? Financial markets tell the world what they think of that | Stephen Koukoulas
The euro has surged by over 2% against the US dollar, jumping to $1.126.
If Trump is in the White House, the European single currency could become a popular safe haven with nervous investors.
The Tokyo market is closing in a few minutes and is still down more than 5%.
A Trump win is shaping to be a huge shock there. Our reporter in tokyo, Justin McCurry, is about to file his analysis of what it means to the region.
A Donald Trump presidency could pose the biggest threat to Washington’s security ties to its two biggest allies in the Asia-Pacific – Japan and South Korea – since the end of the second world war.
The US dollar has now slumped by 1% against the British pound, sending sterling up to $1.25.
That’s nearly a one-month high, but still a long way below the pre-Brexit vote levels (when the pound was worth around $1.48)
While @World_First waits for results , here's the pound v dollar pic.twitter.com/ofSbGf9JWF
Correction – the ASX/S&P200 in Australia has not hit its lowest point since April. It’s just the lowest since Brexit in June. Apologies.
Either way we could be looking at more rate cuts in Australia, according to CommSec chief economist Craig James, where the Aussie dollar has fallen by 1.78% to US76.12c.
Before today, financial markets has only priced in a one in three chance of a rate cut in Australia by mid-2017. If financial market volatility continues and ends up affecting the broader economy, then we can’t rule out a near-term rate cut by the Reserve Bank.
While sharemarkets through Asia have slumped today, a fall in the oil price, higher gold price and weaker Aussie dollar actually have served to benefit sections of the sharemarket and Corporate Australia more generally. Gold bugs would be happy with the higher gold price as would gold producers, with the latter benefitting from a weaker Aussie dollar.
Many analysts are warning that a Donald Trump victory could be bad news for Janet Yellen, the first woman to run America’s central bank, the Federal Reserve.
A man who became known for his TV catchphrase, “You’re fired!”, Trump’s plan to fire Janet Yellen from her position will not be popular with the markets
It’s been a rough day for the ASX/S&P200 index in Australia which has fallen 101.2 points, or 1.92%, to 5,156.6 points. That’s the lowest point since April.
ASX 200 value traded $9.59 billion, third biggest day of the year and +70% above the 30-day average. 92% of stocks lower
Thanks America. Just... thanks.... #ASX200 pic.twitter.com/o9sL7lPte1
#ASX200 is not down as much as it should be because a #Trump win = high rates. Aus debt bubble can't handle that.
Kit Juckes, currency expert at French Bank Societe Generale, says Trump has shocked investors around the globe:
Donald Trump is winning electoral college votes in key marginal states (Florida, Ohio, North Carolina) and while there is still a steep climb ahead for him to win the Presidency, he’s doing a good impression of a cyclist overtaking all his opponents on an alpine stage of the Tour de France. Will he get the polka dot jersey and paint the electoral map red? Markets think so and are responding with the simplest ‘risk off’ reaction imaginable.
Gold and the yen are up. Treasury yields, equities, the Canadian dollar and Mexican peso are down. The Mexican peso has maintained its status as the bellwether of sentiment and is moving particularly sharply.
The financial markets are now indicating that Wall Street could suffer its biggest ever plunge (in points terms) when Wednesday’s trading session begins.
The Dow is predicted to shed 800 points - a bigger points fall than in September 2008 when the financial crisis struck.
Biggest ever daily Dow Jones fall on record is 777.68 in 2008. Futures showing 833 at the moment.
"And now, let's give a warm Wall Street welcome to the new President!" Stock futures -5%.
Japan’s Nikkei has now plunged by over 900 points, or 5.3%, as a wave of selling hits the Asian stock markets.
This is the exact same thing that happened during the EU referendum vote, when investors sided substantially towards pricing in a remain outcome and they were left in complete shock earlier in trading as a result of Donald Trump gaining momentum.
The Dow and S&P have hit their “limit down” on the futures market of 5% – ie they can’t go any further into the red.
Another S&P futures update: pic.twitter.com/UfxhkQBqwl
Dollar Index: -2%
30-Yr Treasury: +1%
For more on what a Trump win could mean for the US economy – a recession for example – look no further than this piece from the Guardian’s Suzanne McGee:
Related: Analysts fear 'volatile' economy – and perhaps recession – under Trump
A Trump victory would bring on a rapid reassessment of Federal Reserve policy. Trump launched a strong attack on Janet Yellen’s stewardship of the Fed during the debate back in September.
He said that thanks to the Fed’s prolonged policy of low rates “when they raise interest rates, you’re going to see some very bad things happen, because they’re not doing their job”. By that he implied that the Fed had allowed rates to stay too low, too long meaning that asset prices inflated by cheap money could deflate quickly when rates eventually rise.
Now the #Fed has just the excuse its been waiting for to blame its failure to raise interest rates in Dec. on!
The #Fed is much less likely to raise rates in December now. #ElectionNight https://t.co/TEroap7KgM
The election results so far are having a major impact on the interest rate markets. Market expectations for a rate hike from the Federal Reserve have tumbled to 50%; earlier on Tuesday expectations were more than 80%. The Fed is unlikely to hike interest rates if we see a sharp and prolonged decline in the stock markets, on the back of a surprise Trump win.
Back to the stock markets where it’s looking very bloody in the usual parlance.
If #markets moves persist or go further, there will be some painful forced selling tomorrow – starting with #Mexico where #Peso is down 11%.
More from Jill Treanor on the trading floor in London on why markets are reacting this way.
The great unknown is the economic policy, based around a trade war with Mexico, it’s third largest trading partner, and China, it’s biggest trading partner. Brexit was about UK instability. Trump is about global instability.
Markets are taking the Trump surge on the chin. Risk assets are being heavily sold across the board, with key barometers such as US dollar-Yen and gold reflecting investor sentiment, while the Mexican peso undergoes its own dark night of the soul. It seems remarkable that we are watching this unfold, just a few short months after Brexit. Once again the cat has been set amongst the pigeons. Clinton’s path to the White House, so assured just a few hours ago, now looks to be a dead end. 2016 has been a year of upsets, but none will be as big as a Trump victory. Markets are rapidly reassessing whether a December rate hike, also a distinct possibility until this morning, is now off the cards.
A lot of comment on the impact on the Fed’s much-anticipated rate rise in December. That’s now looking much less likely according to Bloomberg charts as traders price in the shock that is a possible Donald Trump presidency.
#Fed rate hike odds plunge on potential #Trump presidency. 6hours ago traders priced in 82% chance of rate hike, now below 50 #ElectionDay pic.twitter.com/h0Cselzs56
Odds of a December rate hike plunge below 50% https://t.co/DVR0h67CbJ pic.twitter.com/Z0WkaHkXdL
Wonder what is Janet Yellen doing tonight? https://t.co/SDEczG2GDO via @FinancialReview
Investors and market experts are reacting to Trump’s stronger than expected showing.
Chad Morganlander, a money manager at Stifel, Nicolaus & Co. in Florham Park, New Jersey told Bloomberg News:
Put your seat belts on because this is going to be a bumpy ride. Investors will be moving in a chaotic fashion to get ahead of the information flow.
It’s quite scary. The slightest move towards Trump moved the market very quickly. The slightest change in the odds is amplifying market moves and this just shows there’s a lot at stake.
Jill has sent tweeted this from World First in London:
That's the peso falling 10% on screens @World_First pic.twitter.com/pfuoQKA1KT
Jill Treanor, the Guardian’s banking specialist, has got up early to see how foreign exchange traders are coping in London.
She is on the dealing floor of World First, an international payments company, where Jeremy Cook has been watching the results come in through the early hours. In the last 90 minutes have started pricing in a Trump victory, the chief economist tells me. ‘The peso is down 10% agains the US dollar, the Japanese is up 3% against the dollar and gold is up is up $40 an ounce - that’s a big move.’ And, there’s more. The Dow Jones index – a key barometer of the US stock market – is being called to open down 700 points. ‘That’s bigger than Brexit.’
Here is Australia the dollar and the local stock market has been smashed with a 4% loss so far.
The big financial stocks are being burned with investment bank Macquarie Group down 3.8%, and insurance giant QBE down 3.6%. the country’s biggest bank, the Commonwealth, is down more than 3%.
Panic on my screen: ASX200 and AUD/USD crash as Trump edges closer to #USElection win pic.twitter.com/Rdct69ZIdQ
Things moving even more rapidly now despite a likely Clinton win in Virginia. The major equity markets are all down more than 2% now – the Hang Seng is off a whopping 3.5% – and oil is off 4%.
A big story is the state of the Mexican peso, which has now lost 11.5% of its value, according to Reuters.
This is truly a historic moment. I don’t recall such an extreme outlook on the U.S. economy that could be so negative to the Mexican economy. You have to go back to when the United States took half of Mexico’s territory to find such a moment when US politics had such a potential impact on Mexico.
Here’s where we are so far on this dramatic day. The financial world is bracing for a shock as Donald Trump looks on course to become president of the United States.
We don’t usually pay much attention to the humble Mexican peso but it’s acting as a pretty good proxy for the state of the markets today.
Measured against the US dollar it has plunged more than 7% since Trump emerged as the frontrunner. A story of two walls – the one Trump says he wants to build if elected, and the metaphorical one he wants to erect to protect American goods and services.
Breaking News: The Mexican peso has seen its steepest dive in more than 20 years tonight https://t.co/rbmLhxgGR2 pic.twitter.com/AnR7t8H2Iz
Mexican peso now off more than 7% https://t.co/Z1Ge5Gwk1d pic.twitter.com/hNhd9yo977
Mexican Peso getting absolutely kicked silly. Currency now down 7% https://t.co/5SWKkPWe8E
Gold has spiked by nearly 3% as investors look for safe havens. The spot price stood at $1,311.80 an ounce by 0235 GMT, a rise of 2.9%.
Here's the #gold price as @realDonaldTrump surges in the US polls @9NewsAUS @MoneyNewsShow pic.twitter.com/lxy8xljRoV
Clinton plunge on betting markets continues... a brief pause at 50% on Betfair, now down to ~40% pic.twitter.com/gAkL3Txths
In this case whether it’s a Clinton win or a Trump win, at this point there’s really nothing left in the tank to aggressively trade gold.
Asia Pacific stock markets are now in freefall. The Nikkei is down 2.77%, the ASX is down 1.34%, the Kospi in Seoul is off 1.64% and the Hang Seng is down 1.88%.
In futures trading, the Dow is down nearly 500 POINTS.
Chart: VIX Futures - pic.twitter.com/s7prKCEceP
U.S. stock futures plunge as Trump odds of winning improve pic.twitter.com/JZBtQ5j7ym
But in an Australian corner of Trumpland it’s looking a bit rosier.
Things are moving quickly now and the markets are taking a real pasting in Japan, Australia and Hong Kong.
Also, the dollar is down 2.5% against the yen
The dollar has tumbled versus the yen https://t.co/TIc0bVs76w #ElectionNight pic.twitter.com/ctouYh8nie
Tied Game pic.twitter.com/Ns5VWSqoun
More from Justin in Tokyo:
Uncertainty over the result in Florida and other key states has sent the Nikkei stock index below the 17,000 line, having made gains earlier in the day.
The monitors in this picture show the US dollar-yen rate, which will fall if Trump wins as investors sell the greenback. The bottom figure is the Nikkei share average, also falling on Wednesday lunchtime.
The Mexican peso has just plunged against the dollar. A sign investors may now be switching their bets to a Trump victory #USElection2016 pic.twitter.com/H5mMJLUmeg
With Florida and North Carolina edging towards a win for Trump, the futures market is pointing to a hefty selloff in stocks when markets open in the US and Europe later today, according to IG
#USDMXN now selling off as #Trump odds widen. pic.twitter.com/6tueGw4aMa
BREAKING: Dow futures briefly down 200 as election results continue to come in https://t.co/ePpLvhXX7x pic.twitter.com/SaDSsp8N0s
The markets in Hong Kong and mainland China came a little late to the party this morning and are currently in the red, perhaps reflecting the uncertainty about the Florida vote.
The Hang Seng in Hong Kong is down more than 2%, while the CSI300 on the mainland Shanghai is down slightly. More sanguine elsewhere:
A slight detour. Proof that nothing is being left to chance in this election. This man is vacuuming the flags at the Hilton in Manhattan ahead of the Trump/Pence rally later. I didn’t know they did that.
Volatility is the word for the markets at present with no one quite sure where the Florida poll is heading.
In Tokyo, Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities, says:
Most market participants have priced in expectations that Clinton wins the election. However, early votes will likely sway the market and will cause volatility today
Volumes are eerily low in the local markets this morning, which means a lot of investors are still sitting on the sidelines waiting for further confirmation of the outcome of the US election.
Or man in Tokyo, Justin McCurry, is keeping an eye on markets across Asia where trading has become volatile. Markets are open in Shanghai, Shenzhen and Hong Kong now too:
Shares are mostly higher in Tokyo and other Asian markets, the first to open as polls closed in the US. Japan’s Nikkei 225 index added 1.3% in early trading. In a further sign that investors are sticking to their belief that Clinton is heading for victory, the US dollar surged against the yen, a trend that will be welcomed by Japan’s exporters.
Elsewhere in the region, South Korea’s Kospi index added 0.4% and Australia’s S&P ASX/200 jumped 0.8%.
The Mexican peso has also seen a good deal of turbulent trading in the past half an hour.
Reuters reported that the peso – a touchstone for sentiment on the election as Republican Donald Trump’s trade policies are seen as damaging to its export-heavy economy – took a dive when Trump was reported to have a narrow lead in the sunshine state of Florida. Still too close to call though by the look of things.
Presidential race: #Florida with 88 percent in. #ElectionNight #Election2016 pic.twitter.com/NcA44969o1
Any doubting how the markets can tell the story, check these out.
The ASX in Australia dipped into the red a few minutes ago - as did the Nikkei – on some reports that Trump was ahead in some groups in Florida. Still unclear but the markets are back in the black now.
Trump wins among Cubans according to Florida exit polls, loses other Hispanics pic.twitter.com/E0F7E1HDWt
In case you’re wondering what to do with your spare cash in the event of a Clinton win, here’s a seven suggestions from MarketWatch*.
The perfect portfolio for a Hillary presidency: https://t.co/7PNFgXWvZX
Bourses in Malaysia, Singapore and Taiwan have opened and will be followed in a little less than half an hour by Hong Kong and the mainland Chinese markets.
Most experts expect a Trump win to cause a sharp selloff but economists at the National Australia Bank have been looking at the global economy and they reckon that it has shown great resilience throughout shcks such as Brexit and China’s surprise devaluation last year.
The upturn in global output has continued at a moderate pace through numerous shocks and growth scares – the Euro-zone’s worries, Brexit, Chinese market volatility to name just three – highlighting the underlying resilience of demand in the big emerging market economies of China and India and the ability of