Tags: Trump Administration | donald trump | dollar | mexican peso | global stocks

US Futures Tumble 800 Points as Trump Opens Path to White House

US Futures Tumble 800 Points as Trump Opens Path to White House

(Dollar Photo Club)

Wednesday, 09 November 2016 01:44 AM


U.S. stock index futures crashed in the overnight session into Wednesday as a market that had been expecting a victory by Democrat Hillary Clinton scrambled to adjust bets as Republican Donald Trump looked increasingly likely to win the White House.

Trump clinched victories in the key battleground states of Florida, North Carolina and Ohio, and he and Clinton remained in close battles in Michigan and Wisconsin, states that had been expected to land in Clinton's column.

With results in a mere handful of states still unknown, Trump had a lead in votes in the Electoral College, and Clinton's path to the presidency was looking increasingly difficult.

Financial markets reacted violently. The S&P futures slid 5 percent and hit a limit down, meaning the contract could not trade lower, only sideways or up. Dow Industrials futures briefly fell 800 points.

"It's kind of a shock-and-awe type response," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.

An eventual Trump victory "creates all sorts of unknowns" not only in terms of which policies will be implemented but also their timing, he said.

Republicans were expected by major TV networks to maintain their six-year control over the U.S. House of Representatives, and were also on track to defend their Senate majority, although the Senate majority narrowed.

Wall Street is traditionally seen as preferring gridlock, or shared control of the White House and Congress, than a sweep of both Congress houses and the Presidency.

At 00:52 a.m. EST (0552 GMT) S&P 500 e-minis were down 99.75 points, or 4.67 percent, with 1,367,937 contracts changing hands. Nasdaq 100 e-minis were down 241.5 points, or 5.03 percent, in volume of 165,897 contracts, and Dow e-minis were down 717 points, or 3.92 percent, with 223,784 contracts changing hands.

CBOE Volatility index futures shot nearly 40 percent higher, reflecting investors' reservations over a Trump presidency.

The Mexican peso slumped versus the U.S. dollar to a historic low above 20 per dollar. The peso was last down more than 12 percent against the greenback.

The sharp moves in various financial assets are reminiscent of the reaction to Britain's vote in June to leave the European Union, known as Brexit, which markets misread. S&P e-minis fell 5.7 percent over the next two sessions after the vote, but the decline proved a buying opportunity as futures regained their pre-Brexit level within 10 sessions.

"If the selloff in stocks carries through tomorrow and a few days after (assuming a Trump win), it could provide a buying opportunity similar to post-Brexit market action," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.

While stocks fell, traditional safe havens like gold and U.S. Treasuries rose as investors avoided risk. The U.S. dollar index tumbled 1.8 percent.

The U.S. dollar sank and stocks plummeted in market mayhem on Wednesday as investors faced the real possibility of a shock win by Republican Donald Trump that could upend the global political order.

European shares looked set to follow with losses of more than 4 percent as every new TV network projection in the U.S. election showed the race to be far closer than anyone had thought, sending investors stampeding to safe-haven assets. [.EU]

Sovereign bonds, the Japanese yen and gold surged while the Mexican peso went into near free-fall in chaotic trading.

"Markets are reacting as though the four horsemen of the apocalypse just rode out of Trump Tower," said Sean Callow, a forex strategist at Westpac in Sydney.

"Or at least 3 of them - it might be 4 when the prospect of a clean sweep of Congress sinks in."

Investors fear a Trump victory could cause global economic and trade turmoil and years of policy unpredictability, discouraging the Federal Reserve from raising interest rates in December as long expected.

Fed fund futures were even starting to toy with the idea of a cut in rates next year and it was possible the Bank of Japan and European Central Bank might be forced to ease policy yet further.

South Korean authorities were thought to have intervened to steady their currency, and dealers wondered if central banks globally would step in to calm nerves.

Japan's top currency diplomat signalled Tokyo's readiness to intervene if necessary as the surging yen threatened to snuff out its fragile economic recovery.

The scale of the scare was clear in the Mexican peso, which plunged more than 13 percent against the dollar in the biggest daily move in two decades.

"There's a lot of panic in the market, it is definitely an outcome it was not expecting," said Juan Carlos Alderete, a strategist at Banorte-IXE.

The peso has become a touchstone for sentiment on the election as Trump's trade policies are seen as damaging to its export-heavy economy. The risk of a global trade war likewise hammered currencies across Asia, with the Australian dollar leading the rout.

The story was very different against the safe-haven yen, with the U.S. dollar shedding 3.3 percent to 101.85 yen. The euro jumped 2.3 percent to $1.1278.


Asian stocks skidded, with MSCI's broadest index of Asia-Pacific stocks outside Japan down 3 percent and the Nikkei off a savage 5.4 percent.

With voting completed in more than two-thirds of the 50 U.S. states, the race was still too close to call in Michigan, Wisconsin, Pennsylvania and New Hampshire, states that could be vital to deciding who wins the presidency.


Fox News projected Trump had taken Florida and North Carolina, and projected Clinton would win Virginia.

Markets had favoured Clinton as a status quo candidate who would be considered a safe pair of hands at home on the world stage. Analysts had no such certainty about Trump.

"With Brexit we had one bad day but this is different. This is what's scary about putting the most powerful position in the world in the hands of a man who many believe is temperamentally unstable," said Donald Selkin, chief market strategist at National Securities in New York.

"His tax cuts could open up a huge increase in the budget deficit and his trade sanctions could interrupt world trade. This could put us in a recession."

Sovereign bonds flew ahead, pushing yields on 10-year U.S. Treasury notes down 12 basis points to 1.75 percent, again the largest drop since Brexit.

Yields had briefly touched a six-month high around 1.8960 percent in early trade.

In commodity markets, safe-haven gold climbed 3.8 percent to $1,324 an ounce as the dollar slid.

Oil turned tail on concerns over the global economic outlook. U.S. crude shed $1.30 to $43.68 a barrel, while Brent fell $1.15 to $44.89.

Graphic of live election results.

Graphic of live market reaction.

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The U.S. dollar sank and stocks plummeted as mayhem came to world markets on Wednesday as investors faced the possibility of a shock win by Republican Donald Trump that could upend the global political order.
donald trump, dollar, mexican peso, global stocks
Wednesday, 09 November 2016 01:44 AM
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