Global monetary markets convulsed Tuesday evening as Donald Trump was projected to claim victory in the race for your White Household soon after a polarizing campaign that traders had largely bet towards.
On Wall Street, all 3 major stock indices have been down 4 % or far more late Tuesday evening in pre-market trading, with futures for the Dow Jones industrial normal sliding more than 700 points at a single level prior to paring those losses while in the minutes just before the results were clear. Futures trading was temporarily halted for the Conventional & Poor's 500-stock index amid a 5 % loss. By morning they had regained some ground.
The Mexican peso -- which has fallen as the Republican nominee rose inside the polls during his campaign -- nosedived to an eight-year low, according to Bloomberg. The panic stretched all the way to Asia, where Japan’s Nikkei index plunged more than 900 points, or 5.four %, early Wednesday morning. In Europe, the Stoxx Europe 600 index was off 0.7 % right after dropping as much as 2.four percent. In an early flight to safety, gold charged higher. U.S. Treasuries and the yen also surged.
The assumption that Democratic nominee Hillary Clinton would notch a comfortable victory had boosted markets earlier in the week. But on Tuesday night, traders began to grapple with the possibility that Trump's controversial proposals to rip up long-standing trade agreements, deport millions of immigrants and radically re-engineer the tax code could become reality.
“It’s all a little bit crazy now,” said Chris Weston, chief markets strategist at IG Markets in Melbourne. “Pollsters need to go away and have a holiday - every single a single of them should be fired. Markets weren’t prepared for this.”
The sell-off recalled the volatility following Britain's decision this summer to leave the European Union. Traders had largely dismissed the possibility of a so-called "Brexit" but then quickly reversed course as the votes had been counted. That dynamic appeared to be playing out again, with Craig Erlam, senior market place analyst for foreign exchange firm Oanda, calling Tuesday's rout simply "a bloodbath."
Among Trump's chief campaign promises has been to pull out of the North American Free Trade Agreement and slap double-digit tariffs on goods from Mexico and China, moves that experts fear could spark a trade war. He also has proposed massive tax cuts for both individuals and corporations that could cost as much as $6 trillion, according to your nonpartisan Tax Policy Center. Though Trump’s message of isolationism has resonated with voters who feel left behind by globalization, many experts have warned his proposals could wreck havoc on the U.S. recovery.
Moody’s Analytics forecast Trump’s policies could lower employment by 3.5 million jobs and raise the unemployment rate to 7 % by the end of his term. The firm also predicted the nation would enter a recession in 2018.
In addition, traders dialed back their expectations that the Federal Reserve would hike its benchmark interest rate in December. The central bank had hinted it was ready to move following signs of economic resilience, but that could be threatened amid the turbulence in monetary markets.
“Trump has not held any public office before and lacks experience of making currency and fiscal policies. He also has extreme views,” said Yang Delong, chief economist at First Seafront Fund in Shenzhen. “All these will be viewed by the traders as huge uncertainty. That’s why the markets are down and the gold price is going up.”
But one particular of Trump’s most prominent supporters, billionaire Carl Icahn, predicted that the sell-off would be short-lived. Many of Trump's proposals have been lacking in detail, but his campaign has broadly argued that his aggressive stance would help lift the economy out of the doldrums and unleash unprecedented growth that would allow his programs to pay for themselves.
"It's going to cost the rich guys in New York money, and that's too damn bad," Icahn said on CNBC on Tuesday night. "But you have to think about where this country is going to be within the next five, 10 years, and you can't have it going the way it's going."
However, the prospect of a Trump presidency was enough to persuade Mexican leaders to meet last week to craft a “contingency plan” in the event of an “adverse” election result. The head of Mexico’s central bank has compared a President Trump to a “hurricane” that could damage the country’s economy. In addition to hiking tariffs on its exports towards the United States, Trump has made building a wall along the Mexican border a hallmark of his campaign. Already, the declining value of the peso has factored into the central bank’s decision to boost interest rates.
“It’s the Pavlovian response: The bell rings, Trump does better, the Mexican [peso] sells off,“ said Ed Shill, chief investment officer at QCI Asset Management.
Meanwhile, the board of South Korea’s stock exchange called an emergency meeting Wednesday morning to discuss the sharp fall from the economic markets.
“We haven’t taken any measures regarding the stock market reaction on the U.S. election yet, but we are constantly monitoring the markets and the U.S. elections,” said Kang Byung-mo, head of monetary market place analysis at Korea Exchange.
In China, the Communist Party’s China Daily newspaper said that whoever wins, democracy would be the loser within the United States, noting the race was viewed as a “chaotic political farce” in many people’s eyes. European leaders never hid their overwhelming preference in the U.S. vote. Among important U.S. allies across the Atlantic, leaders spoke openly of their contempt for Trump and their fear of the consequence should he be elected.
Protocol normally calls for foreign leaders to maintain strict neutrality within the internal affairs of their allies. But that didn’t stop President Francois Hollande from declaring that some of Trump’s policy positions made him want “to retch.” The British Parliament even debated banning the New York billionaire from its shores.
The exception for the anti-Trump sentiment in Europe came from far-right leaders and other anti-immigration populists.
British Brexit campaigner Nigel Farage cheered Trump’s rise and appeared alongside him at U.S. rallies, urging America to stand up to the establishment from the way that he said the British public had with its E.U. referendum in June. Hungarian Prime Minister Viktor Orban, who built a fence to block migrants amidst the refugee crisis, was among the few governmental leaders in Europe to back Trump.
Staff writers Congcong Zhang, Luna Lin and Jin Xin in Beijing, Yoonjung Seo in Seoul and Griff Witte in London contributed to this report.