International markets trembled overnight as global investors grappled with news that GOP nominee Donald Trump had defeated Democratic rival Hillary Clinton in America’s 2016 presidential election.
In a result that shocked analysts and bucked trends identified in most pre-election polls, The Associated Press called the race for Trump around 2:30 a.m. EST. Investors appeared to begin panicking well beforehand, however, as Asian markets and American futures trading suffered seismic losses.
“This is unlikely to be favorable for markets,” Keith Wade, chief economist and strategist at Schroders asset management company, said in a statement Wednesday that warned of “volatility” and a “high probability of trade wars.” “More broadly, the prospect of protectionism and lower global growth will hit equity markets and risk assets worldwide.”
Indeed, Japan’s Nikkei 225 index was down nearly 5.4 percent as of 4:28 a.m. EST, while Hong Kong’s Hang Seng index plummeted nearly 2.2 percent. Markets in Australia, South Korea and China were among those to be dragged lower early Wednesday morning, although the surprisingly resilient Shanghai Composite index was down only 1.3 percent at traders’ lunch break before rebounding slightly later in the day.
Meanwhile, the Mexican peso dropped to a record low overnight. The currency’s strength against the dollar had moved opposite to Trump’s perceived odds of winning the presidency throughout the election cycle, and its downfall suggests investors aren’t optimistic about what’s in store for the Mexican economy. Trump has repeatedly suggested he’d coerce Mexico into paying for a wall along the country’s border with the United States and would consider raising tariffs on Mexican goods and restructuring the North American Free Trade Agreement — all of which don’t bode particularly well for the Mexican economy.
Mexico’s central bank and the country’s finance ministry called an emergency press conference to be held later Wednesday morning to help outline what Trump’s victory means for the Mexican nation going forward.
All the while, gold prices soared as investors poured money into assets historically considered to be safe havens. Gold boomed more than 3 percent overnight and was set for its largest gains since the day after the United Kingdom voted to leave the European Union.
“A President-elect Trump represents to many the mother of all uncertainties when it comes to public policy,” Bernard Baumohl, chief global economist at the Economic Outlook Group, wrote in a research note last week. “For instance, how far will he go to implement his threats and impose substantial tariffs on goods coming in from China and Mexico? Will those countries then retaliate against the U.S.?”
Many analysts compared the market’s response to Trump’s surprise victory to what happened after the U.K. voted to leave the EU. David Bailin, a managing director and global head of managed investments at Citi Private Bank, told CNBC in an interview Monday that a Trump victory would amount to “Brexit on steroids.”
“Trump winning the U.S. presidency is a bigger deal than Brexit,” Nigel Green, founder and CEO of deVere advisory outfit, wrote in a research note Wednesday, indicating that market spectators should prepare for “enormous volatility.” “With a Trump win, we can expect in the immediate aftermath a double-whammy negative impact on the market. This is because the likely sell-offs will be compounded by the markets having priced in a Clinton victory and were wrong.”
Markets had gained in recent days as polls indicated Clinton was likely to run away with the presidency. The Dow Jones industrial average gained more than 370 points Monday and was up more than 70 points Tuesday before voting results were released.
Trump’s victory is expected to quickly correct investors’ miscalculation.
“I’ve seen reasonable estimates that the market could fall 10 percent [should Trump win the election],” says Robert Shapiro, former undersecretary of commerce for economic affairs, co-founder and chairman of Sonecon advisory outfit and a former advisor to President Bill Clinton. “How long that lasts, though, would depend on him. If he wanted to figure out a way to back away from his promise to impose these tariffs on Chinese and Mexican goods, you might see a positive response from the market. Who knows?”
U.S. futures markets initially plummeted as analysts held their breath for what was shaping up to be the country’s worst day on Wall Street since the immediate aftermath of the Sept. 11, 2001, terrorist attacks.
Dow futures slipped 800 points early Wednesday morning, though by 4:28 a.m. the index was only down about 280 points.
It’s difficult to say what will happen once markets open later in the day, but it’s not looking good in the near term for those on Wall Street.
“Buckle up for a bumpy ride in the global markets,” Green said. “Whether President Trump will, in fact, do what he has said he will do throughout his campaign, or whether it was just soaring rhetoric to whip up his support base — for now, Trump winning is sending shockwaves across the world.”
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Global Markets, Futures Tremble as World Grapples With President Trump originally appeared on usnews.com
