Closing post: Pound profits after surprise US election
After a momentous week, Wall Street seems to have simply run out of energy.
The Dow Jones index is virtually flat now, up 0.02%, while the S&P 500 and the Nasdaq are slightly in the red. Traders are taking a breather, and watching political events unfold.
And there’s plenty happening -- the latest news is that vice-president in waiting Mike Pence has just been appointed to lead the Trump transition team, instead of Chris Christie.
Our US politics liveblog has all the details:
So I’m going to wrap up for the week now. Here’s Katie Allen’s news story on today’s financial developments.
Goodnight! GW
JP Morgan analysts are warning tonight that Donald Trump could destabilise the US economy if he slaps tariffs on new imports from abroad:
JPMorgan on Trump-onomics pic.twitter.com/Zx9VnvWNoY
— James Pethokoukis (@JimPethokoukis) November 11, 2016
Hopefully they’ve sent a copy to their boss, CEO Jamie Dimon -- rumoured to be in the running to become the next Treasury secretary.
One other interesting development tonight....It’s emerged that three employees at major banks have recently been arrested by Britain’s National Crime Agency as part of a UK insider trading investigation.
The arrests are linked to the Panama Papers, and were made in the last few months but only reported today.
More here:
Updated
Pound has a good week against the euro
As currency traders head home, or to the nearest City winebar, they can reflect on the pound’s unexpected strength this week.
As this chart shows, sterling has gained more than 3% against the single currency this week, from €1.12 to around €1.16.
There’s an argument that people are hoping that Brexit will be easier with Trump in the White House.
But I think the pound is really benefitting from worries about Europe. Italy’s constitutional referendum next month, or the French and German elections in 2017, could all undermine the eurozone.
Conner Campbell of SpreadEx says:
Fears of the rising political right in the Eurozone and potential US instability once Trump takes over are crucially helping to put Brexit on the back-burner for the time being.
The US government bond market is closed today for Veterans Day.
And bond traders should enjoy the rest while they can - Treasuries will surely be volatile next week too, as the clock ticks towards Donald Trump’s inauguration.
Capital Economics’ Julian Jessop predicts further losses, as the markets try to price in the prospect of a new infrastructure spending programme financed by debt.
He writes:
The election results mean that there may now be a big fiscal expansion, which adds to the downside risks for bonds for at least two reasons. First, it would increase their supply. Second, we think it would mainly boost inflation rather than growth.
Jessop also suspects that the Wall Street rally will fizzle out, as investors focus their minds on possible trade wars under President Trump.
For a start, the strong performance of some sectors (such as industrials, basic materials and energy) has reflected hopes for a big splurge on infrastructure spending, which we think is unlikely – most of the fiscal stimulus is likely to take the form of tax cuts. Stock markets do not tend to fare well when inflation is rising either.
And investors may start to worry again soon about the implications for growth of Trump’s other proposals, such as trade tariffs.
There’s no respite for the Mexican economy, I’m afraid.
Its government bonds are weakening again, driving up yields, and the peso is hitting fresh lows:
Look at the yield on the Mexican 5 year this week. pic.twitter.com/LTWM3aibrA
— Joe Weisenthal (@TheStalwart) November 11, 2016
no letup in Mexican Peso selling...it's lost 14% of its value since election day and continues to fall pic.twitter.com/73LhPpV0IG
— Sara Eisen (@SaraEisen) November 11, 2016
European markets end week with losses
The Trump Jump we saw in the immediate aftermath of this week’s presidential election has hit a hump.
London’s FTSE 100 has suffered another day of chunky losses, closing down 97 points, or almost 1.5%.
The stronger pound is partly to blame; sterling is up 0.5% right not over $1.26.
Joshua Mahony, market analyst at IG, explains that Brexit anxiety has faded this week.
If FTSE bulls were emboldened by Wednesday’s incredible fightback to regain the 7000 mark, they will be feeling somewhat weary today, as the UK benchmark suffered substantial losses amid a comprehensive recovery for sterling.
The pound was expected to rise on last week’s realisation that Article 50 is now in the hands of Brexit-sceptic MPs, and with the US election now out of the way, we are seeing that pound rebound take shape. Much like a weakening euro was perceived to be good for UK stocks, today’s pound rally is doing little to help the FTSE, which has suffered more than most.
Most other European stock markets also closed in the red, and Wall Street is still down
As flagged up earlier, analysts believe Europe will suffer if Trump does manage to boost US growth through tax cuts and a spending boost.
Jasper Lawler of CMC Markets says:
The new Donald Trump vision for America is drawing the attention of international capital. This renewed belief in a better environment for corporate America is at the expense of Europe and especially emerging markets.
The City is also concerned by the heavy losses in the bond market this week, which wiped out around $1trn. That, funnily enough, is also how much has been added to the US equities market this week, according to Bloomberg.
Updated
Buffett: Wealth inequality drove some voters to Trump
Billionaire investor Warren Buffett says income inequality helped to drive Donald Trump to the White House.
In an interview with CNN, Buffett, who has called for tax reform in the past, says ordinary Americans feel that wealth distribution is unfair:
The Forbes 400 [list of wealthiest Americans] had $93bn dollars in 1982, and they’ve got 2.4 trillion dollars today. That’s 25 times as much.
If you’ve been working 40 hours a week, maybe holding a second job and you work with the Little League [junior baseball] and you’ve been a good parent, and you’re really struggling.
Then you think, “What’s wrong with this picture?”, and you want to change the picture.
Buffett, worth an estimated $70bn, also criticises Trump’s criticism of free trade, saying protectionism would harm the US economy.
But while Buffett isn’t a fan of Trump, he’s now calling on Americans to back the president-elect. Unity, he says, is now crucial, after a particularly negative and personal campaign:
It’s every important that the American people coalesce behind a president.
That doesn’t mean they can’t criticise, or disagree with what he’s doing. But we need a country unified by a president.
Buffett also warns that Trump can’t deliver on all his pledges, such as doubling economic growth.
“Nobody can grow the economy 4% in real terms over time...The math is too extraordinary.”
The full interview is online here.
Buffett after Trump win: '100%' optimistic about America. My full conversation w/ @WarrenBuffett on the election: https://t.co/fIR5WOHTim
— Poppy Harlow (@PoppyHarlowCNN) November 11, 2016
Speaking of Europe... Trade commissioner Cecilia Malmstrom suggested today that talks with the US about the controversial TTIP agreement will probably be ‘frozen’ for a while now.
Malmstrom told reporters in Brussels that:
“There will be a natural pause, of course, while we wait for the next administration; then, for quite some time TTIP will probably be in the freezer.
Then what happens when it’s defrosted, I think we will need to wait and see.”
Malmstrom: "I don’t think we see the resumption of any TTIP negotiation in quite a long time.”
— Duncan Robinson (@duncanrobinson) November 11, 2016
This week can’t end enough for City traders, who are sending shares steadily lower in London.
The FTSE 100 is now down 116 points, or -1.7%, at 6712.
Precious metals firms are leading the rout, along with oil companies and major exporters.
#FTSE100 lows of the week. Risk off into the weekend to complete bearish flag?
— Mike van Dulken (@Accendo_Mike) November 11, 2016
Germany is defying the global market selloff today, with its DAX index slightly higher.
That’s partly thanks to Deutsche Bank, whose shares have surged over 4% today. There’s speculation that the German lender has a better chance of negotiating a lower penalty with the US Department of Justice, over misconduct before the financial crisis.
Deutsche should also benefit from a higher inflation environment; record low interest rates have hurt its profitability.
Its share plunged through €10 at the end of September, on fears over its financial health. They’re now worth €14.7
Europe’s biggest threat from the Trump presidency is a new trade war that scuppers exports and growth, says Kallum Pickering of Germany’s Berenberg bank.
He writes:
Europe earns almost 20% of its GDP from exports, that is 50% more than the US [see chart below].
European producers would feel the pinch of a more inward-looking and less trade-oriented US. A US shift towards isolationism over the next four years that might then be mirrored by other countries is the major economic risk for Europe following the Trump victory.
If Trump does what he said in the campaign, namely brand China as a currency manipulator and place a 45% punitive tariff on Chinese imports, he could trigger a trade war. While Congress would block many of his more extreme policy proposals, such a move would badly exacerbate a tilt in the Western world against globalisation. Trade oriented economies like those of Europe would lose even more from that than the US.
After several days of gains, the US stock market appears to be readjusting to the new reality.
Some of the shares that have done best since Donald Trump won the election are leading the fallers.
That includes drugs firms Pfizer (-2%) and Merck (-1%), who had posted gains after the prospect of a price-gouging clampdown faded with Hillary Clinton’s victory chances.
Exxon Mobile is down 1.8% -- it had been another Trump gainer, as the next president is relaxed about the dangers of climate change.
And Caterpillar had lost 0.6%; having been driven up by the prospect of new orders for its digging machines to help build new American highways, airports and schools.
Just in: American consumer confidence has jumped this month, beating expectations.
The University of Michigan consumer sentiment index has just come in at 91.6, up from 87.2 in October.
https://t.co/xrUXYmWY0o Michigan Confidence Nov: 91.6, Exp 87.5, Prev 87.2
— NTMarkets (@NTMarketscom) November 11, 2016
However... the numbers were collected before the US election results were known. So investors might not read too much into it....
Updated
The copper price is in retreat! Having been up almost 10% today, it’s now shed those gains since Wall Street opened.
Copper now in red. Haven' seen such wild moves in any market since... the British pound almost every week pic.twitter.com/B8FVrClDDZ
— Georgi Kantchev (@georgikantchev) November 11, 2016
Wall Street is open, for the final trading session of a tumultuous week.
And shares are dipping in early trading, pulling the three main indices into the red:
A catchup: Trade and inflation fears hit markets
Wall Street is about to open, following a minute’s silence for Veterans Day (Europeans have already marked Armistice Day). So let’s catch up quickly:
Fears of a new wave of protectionism and a surge of inflation are causing fresh turbulence in the financial markets today, as Donald Trump’s election victory continues to grip investors.
The British pound has romped to its highest levels since the ‘flash crash’ of early October. It’s currently trading 0.5% higher at $1.261 against the US dollar, and €1.157 against the euro.
Analysts say sterling is benefitting from hopes that Britain and the US could work closely together, in a post-Brexit world. However, we still don’t have a clue, frankly, about how president Trump will approach international relations.
Confused by the Foreign Secretary's assertion that Trump will want a free trade deal with the UK. His campaign was hostile to free trade
— Alex White (@AlexWhite1812) November 11, 2016
The stronger pound has hit London shares, sending the FTSE 100 down 86 points, or 1.26%, to 6741.
Earlier, emerging markets were hit by wild gyrations, with many currencies sliding against the US dollar. Trump’s victory fuelled fears of weaker global trade and a flow of capital out of the developing world and back into American assets.
Indonesia’s rupiah tumbled by 3%, forcing officials to intervene to prop the currency up. And Mexico’s peso has fallen to a new record low.
Commodity markets have also seen drama, with the copper price shooting up. Copper is seen as a bellwether of US economic growth, and the speed of its recent gains have shocked traders.
And it’s turning into a very bad week for bond prices. Traders arre ditch sovereign debt in anticipation that inflation will push up. A staggering $1 trillion dollars has been knocked off the market since Monday (leaving the global market worth around $45trn).
This is pushing government borrowing costs up, especially for Italy - which might be the next country hit by political instability.
Italy’s 10-year yield climbs above 2% amid concern the wave of populism will spillover to December's referendum https://t.co/6n8Zo9CtpP pic.twitter.com/BqlMmLvUUn
— David Goodman (@_DavidGoodman) November 11, 2016
Updated
The strengthening pound highlights concerns that relations between Europe and America will deteriorate, says Ranko Berich, head of market analysis at Monex Europe.
“Sterling is trading up, possibly because the risk of Brexit derailing Britain’s trading relationships has now been put within a context of President Trump potentially aiming to renegotiate NAFTA.
Equally plausible is the risk of Italy exiting the European Union as a result of Matteo Renzi failing to pass constitutional reforms and losing power to the Eurosceptic Five Star Movement.
There’s also the possibility that British interest rates will rise sooner than expected:
“The increase in global inflation expectations also puts the Bank of England under scrutiny as one of the first central banks to potentially respond to an increase in inflation by withdrawing accommodation.”
Sterling Finds Lifeline in Donald Trump https://t.co/4Qsm3HzqPx pic.twitter.com/pKWHncrqmI
— Jon Sindreu (@jonsindreu) November 11, 2016
The futures market is suggesting that the US stock market will fall, when trading begins in around 80 minutes.
The Dow is expected to dip by 0.2%, or 38 points, having hit a record high last night. The tech-focused Nasdaq is heading for further losses, down 0.8%.
Good morning. Futures heading into Friday's pre-market: Equities down, Crude Oil down, NatGas down, Gold down, and the USD is flat. $SPY pic.twitter.com/hVE8U2MfyR
— Jack Damn ❄ (@JackDamn) November 11, 2016
Britain is on the brink of a ‘hard Brexit’ that will further diminish its standing in the world as it loses free access to Europe’s single market.
So says Standard & Poor’s in a new, rather depressing, assessment of the UK.
In it, S&P’s Moritz Kraemer, says there is a ‘gulf’ between Britain and fellow EU members, and big divisions at home:
“Far from healing festering wounds, as was then Prime Minister David Cameron’s intention, the referendum has deepened and laid bare the schisms in British society.
“Most of the economic impact will hit Britain itself. The second-round effect on the world economy is likely to be more limited, as the UK economy accounts for a small and shrinking share of global GDP.”
More here:
Julian Jessop of Capital Economics also thinks investors are being too blasé about the president elect:
Markets seem to believe #Trump will deliver the one thing he probably can't - a big #fiscal stimulus - and ignoring all the bad stuff he can
— Julian Jessop (@julianHjessop) November 11, 2016
Mexico’s financial markets are suffering another bad day, as fears over future trade relations with America keep rising.
Mexican government bond prices have hit their lowest levels since February, as the peso keeps sliding to record lows (now at 21.2 peso to the $1).
#Mexico Peso falls beyond 21 per Dollar as Trump induced EM rout deepens. pic.twitter.com/niQFpBWBVM
— Holger Zschaepitz (@Schuldensuehner) November 11, 2016
Nicholas Hyett, equity analyst at Hargreaves Lansdown, highlights some significant market moves in London:
Asset managers Aberdeen and Ashmore are down 5.3% and 6.7% respectively on worries that a spending splurge under Trump could cause the Fed to hike interest rates to fend off inflation. That has hit emerging market bonds, to which both have exposure, hard this morning.
The ongoing rally in sterling is boosting the UK’s retailers, with Next, which has previously warned that the lower pound could result in a 5% increase in prices at its stores, leading the way, up 3.4%.
Two moves really stand out, on a day of general market volatility:
Mexican peso tumbles to record low 21.00/dollar. It's down 10% this week, worst week since 2008 and second worst since 1995 Tequila crisis. pic.twitter.com/tiGzxhBSa9
— Jamie McGeever (@ReutersJamie) November 11, 2016
No one can succeed like Doctor Copper.
— Jamie McGeever (@ReutersJamie) November 11, 2016
Copper +19%, its biggest weekly rise since 1979. pic.twitter.com/rj7WAkdM21
In case there was any doubt about who’s expected to benefit from a Trump presidency...
Interesting graph from JPM Asset Management on sectors post-election. Triumph of the banks pic.twitter.com/0mIpfI1LUU
— Philip Coggan (@econbuttonwood) November 11, 2016
Yup, that’s banks, industrial firms, healthcare providers and traditional energy all UP, with technology and consumer goods firms DOWN.
The sharp selloff in emerging market currencies earlier today (details here) appears to have sent a shiver through European markets.
After seeing the Dow hit a record high last night, investors are reassessing the situation... so we could see falling shares on Wall Street too.
FXTM research analyst Lukman Otunuga says:
Markets awoke with a change of heart during early trading on Friday with emerging market stocks descending into the abyss as fears heightened over higher US interest rates under new US President Donald Trump.
Copper is continuing to defy the wider losses, driven by hopes of a new US infrastructure-spending plan.
The copper price has jumped another 5% today towards $5,900 per tonne, the highest since June 2015.
This crazy copper surge just keeps going https://t.co/XBf3PfLJ4k pic.twitter.com/dBDD7P6hW0
— Thomas Biesheuvel (@tbiesheuvel) November 11, 2016
City investors should certainly keep an eye on the protests taking place in major US cities since the election, as they ponder how events will play out.
The scale of the anger about Donald Trump’s victory may shake any breezy complacency that the next president can simply unite the country, push some tax cuts through Congress, and kick off a Keynesian-style rebuilding project.
Naeem Aslam of Think Markets says:
The social unrest over in the US represents a risk for markets which traders should not ignore. This is very important and President Trump needs to address this issue as he has taken custody of a divided country.
Yes, the equity market has achieved another record high over in the US, however, if these protests picked up more steam, we could have some serious problems which could be followed by a sharp sell-off for the market. Investors could lose the confidence and that might result in a move from risk on trade to risk off trade.
Aslam also reckons that Trump’s victory could help Britain as it exits from the EU:
As for the UK, Theresa May, is going to take advantage of the situation as Donald Trump was a big supporter of Brexit. She has been invited to the US, the trade discussion will be on the forefront. The odds are higher that Donald trump will be a lot more relaxed in relation to striking some exclusive deals with the UK. If Theresa May becomes successful in carving some special deals with the US, it will make the matter a lot easier in achieving a similar goal with other countries like China and India
All Europe’s stock markets have all slid into the red, following the heavy losses in some emerging markets overnight.
Some traders are anticipating that the European economy may also be buffeted by events in America.
Mike van Dulken of Accendo Markets says:
The new Donald Trump vision for America is drawing the attention of international capital. This renewed belief in a better environment for corporate America is at the expense of Europe and especially emerging markets.
Rising pound sends London shares sliding
The strengthening pound is a punch in the stomach for the British stock market.
The FTSE 100 has now shed 75 points, or -1.1%, at 6752, dragged down by international firms who earn in dollars.
Shire Pharmaceuticals and Rolls Royce, the engine maker, are both down over 3%, while Standard Chartered (-4.7%) continue to suffer from the turmoil in its key Asian emerging markets.
And the smaller FTSE 250 is also suffering, down 0.9%.
After some short-term gains after the US election, the City is now bogged down with the thorny question of what the next US president will actually do.
Chris Beauchamp of IG explains:
The initial bounce was driven by a realisation that Trump’s infrastructure stimulus would indeed come to pass, but since then investors have been scrambling to work out all the other implications, and this will take far longer. In this climate of uncertainty, markets such as the FTSE 100 now look expensive for now, especially with a rising pound.
Updated
Predictions of higher American inflation (and interest rates) have pushed the US dollar up against almost every major currency this week.
The pound, though, is a rare winner - perhaps showing that Brexit fears have either eased or simply been temporarily ignored.
The theme within FX markets is risk-off. EM currencies like Peso or Real get Trumped. pic.twitter.com/cCpOcggM2s
— Holger Zschaepitz (@Schuldensuehner) November 11, 2016
Norman Lamont, a former British finance minister, claims that European leaders will be spooked by the double-whammy of the Brexit vote and Trump’s election win.
He argues that the two events are different -- Brexit is about ‘free trade’ with the whole world, he insists, while Trump’s view on trade are clearly different.
But still:
On the whole, the psychological factor is one that will worry the Europeans quite a lot.
Updated
The pound has now gained one percent, or 1.25 cents, against the US dollar this week -- making it a rare winner from Trump’s victory.
The pound is now higher than its levels before October’s ‘flash crash’.
Caxton FX analyst Alexandra Russell-Oliver suggests sterling is benefitting from the prospect of America and Britain remaining close (despite political upheaval in both counties this year).
The pound may be receiving additional support as President-elect Trump emphasises that the US and the UK will continue to enjoy a “very special” relationship.
Pound GBPUSD back to where it was pre-flash crash. Breaking out of the post EURef downtrend but early days, plenty of hurdles still left: pic.twitter.com/aUx6sNg7ug
— David Jones (@JonesTheMarkets) November 11, 2016
Updated
The pound has also gained ground against the euro, up almost one eurocent at €1.161.
That means one euro is now worth 86.1p.
Tony Cross, analyst at TopTradr, says fears of European political instability are pushing sterling up.
Granted it’s starting from a low base given the beating the currency took, both from the shock Brexit vote and the flash crash just over a month ago, but this is increasingly looking as if it’s been overdone.
Critically there’s growing concern that we’ll see a rising tide of nationalism across continental Europe, with French elections in the new year a real cause for concern, pushing EUR/GBP down to below 0.8700 for the first time since late September.
Updated
Pound hits $1.26
Zing! Sterling has just jumped over the $1.26 mark for the first time in five weeks, a gain of 0.5%.
It’s moving (slowly) towards the levels seen before prime minister Theresa May pledged to start the Brexit process by March 2017 (when the pound was worth $1.30).
Trump’s election success seems to have shunted concerns over Britain’s future onto the back burner - for the moment, anyway:
Pound emerges as unlikely winner of U.S. Election. Sterling is the best performing major currency this week - https://t.co/xlti7KbePc pic.twitter.com/IcatWUX9MN
— David Goodman (@_DavidGoodman) November 11, 2016
If GBP continues to recover at this rate Carney won't have to worry quite so much about that UK inflation overshoot
— Mike van Dulken (@Accendo_Mike) November 11, 2016
Mexican peso hits new low
Newsflash: The Mexican peso has hit a new record low, as the turmoil in emerging market currencies continues.
The peso has just lurched down to 20.8385 against the US dollar, as traders expect shockwaves from Trump’s election win.
Big EM drops: Indones Rupiah dn ~2.5% at 4.5mth low, Peso ~record lows (dn ~7.5% ths week), Br Real dn 5% to 5mth low,Bovespa dn 3.5% @CNBC
— Louisa Bojesen (@louisabojesen) November 11, 2016
Updated
In another alarming move, the yield on Italy’s 10-year government bonds have hit their highest level in a year.
There are fears that Italy’s prime minister, Matteo Renzi, will lose his referendum on constitutional reform next month, triggering a new bout of political instability.
In London, the FTSE 100 has dropped 26 points in early trading, to 6801, adding to yesterday’s 80-odd point decline.
So-called ‘defensive stock’ such as utility companies and tobacco makers are up -- after all, we’ll still need energy and water next year.
But Standard Chartered, the bank with plenty of exposure to Asia’s emerging market, have dropped almost 5%.
The pound is also pushing higher this morning, now at $1.26, which is dragging down the share price of internationally-focused companies.
European markets are a little higher, though, after German financial giant Allianz reassured investors by reporting better-than-expected profits.
Emerging market currencies are also being hit by the prospect that US interest rates will be raised next month (making the US dollar more attractive).
FXTM vice-president of Market Research, Jameel Ahmad, reckons the Federal Reserve is under strong pressure to deliver a hike in December:
While the declines seen in Asian currencies are being linked to the impact of trade throughout the continent if Donald Trump enforces protectionist trade policies, the return of expectations that the Federal Reserve will still raise US interest rates in December is strengthening the Dollar and also pressuring the emerging market currencies.
If the Federal Reserve do not raise US interest rates in December as they have been preparing the markets towards for months following such a spectacular rebound in stocks after the victory by Trump, it will raise questions over credibility and concerns that they are worried about Donald Trump taking over office in January.
UK 10-year gilt yield spikes in bond selloff
The government bond selloff is continuing this morning, as investors continue to anticipate that Trumponomics will push up inflation.
Britain’s 10-year gilt is falling, driving up the yield (interest rate) on the bond to 1.4% for the first time since June, up from 1.34% last night. That’s a chunky move, pushing up the Westminster government’s cost of borrowing.
French, German,Spanish and Portuguese bond yields are also falling today, as money pours out of sovereign debt
Trump induced bond rout continues. German 10y bund yields jump to 0.311%. pic.twitter.com/NaWyA29nON
— Holger Zschaepitz (@Schuldensuehner) November 11, 2016
Reminder: yields rise when prices fall, as investors are demanding a higher rate of return for holding the debt.
Bloomberg reports that more than $1trn has taken out of the bond market this week alone:
Bonds tumble by >$1trn this week as Trump seen game changer. (via BBG) pic.twitter.com/q9x9fQX6rS
— Holger Zschaepitz (@Schuldensuehner) November 11, 2016
Emerging markets hit by Trump worries
It’s been a wild day in the emerging markets, as nervous traders fear a new wave of American protectionism.
Currencies stumbled and shares slid amid worries that exports will fall once Donald Trump is in the White House. There is also angst that some of the ‘hot money’ capital that has flowed to developing countries will soon move back to the US.
Indonesia suffered a bad day - the authorities were forced to intervene in the foreign exchange market after the rupiah plunged 3%, its biggest drop in five years.
THIS is your currency to watch today. Indonesian Rupiah weakens most in over 3 years. (yes that's a 1-day move on the chart) pic.twitter.com/Qds4w0Ck2Q
— David Ingles (@DavidInglesTV) November 11, 2016
Indonesian Central Bank intervened overnite to stabilize currency after biggest Rupiah drop in 5 yrs..pple putting money back into US assets
— Louisa Bojesen (@louisabojesen) November 11, 2016
This also sent shockwaves through Indonesia’s stock market -- the Jakarta Composite fell over 3%, on track for its worst day in a year.
Among other emerging market currencies, South Korea’s won lost 1.1 per cent, the Taiwanese dollar Indian rupee shed 0.5%, while the Thai baht is down 0.4 per cent.
It wasn’t a good time to be a peso, either.
The Philippine peso has hit a seven year low, while its Mexican counterpart has fallen back towards record levels due to worries about the Trump’s anti-Mexico stance.
More details here:
Updated
The agenda: Markets gripped by fears after USA election
Good morning.
Forty eight hours after the US election results flooded in, Donald Trump’s victory over Hillary Clinton continues to reverberate through the financial markets.
But there’s also a real sense of fatigue this morning, as traders try to anticipate the next few moves and analysts frantically assess the implications of a Trump presidency and a Republican-dominated White House.
That sound you hear coming from the City is the sell-side frantically rewriting drafts of their year-end forecasts
— James Mackintosh (@jmackin2) November 10, 2016
Last night, the Dow Jones index hit a new all-time high - a phrase we didn’t anticipate writing when a swathe of key battleground states went Republican red in the early hours of Wednesday morning.
Wall Street traders are piling into companies such as Caterpillar, anticipating a new infrastructure programme. Banks are also in demand, as Trump’s transition team signal that they will dismantle the Dodd-Frank regulations.
But money continues to flow out of government government bonds at an alarming rate, driven by predictions that the tax cuts and debt-fuelled stimulus plan promised by Trump would drive up inflation.
RBC Capital Markets explain why investors think the US economy might get a lift, at least in the short term:
Given Trump’s election night speech and the generally feel-good vibe raining down on Trump from within his party, there is reason to be optimistic. Time will tell. But if you were to press us on the economic impact, directionally we are inclined to believe the net result will be positive.
Practically speaking it’s difficult to make a call on how the Republican sweep impacts the economic outlooks over the medium term without having a concrete framework of legislative measures in place. But if the conciliatory messaging from the Congressional Republicans and President-elect Trump are any indication, we could be poised for some significant pro-growth initiatives very early on in the administration. We note that corporate tax reform is “low-hanging fruit” and we would add regulatory reform to that list as well (given the rhetoric over the last 24 hours).
BUT....Trump’s anti-immigrant, anti free-trade stance is also sending a chill across developing markets - who have benefitted from the increased pace of globalisation in recent years.
Jeffrey Halley, a market strategist at Oanda Asia Pacific in Singapore, says big changes are afoot, telling Bloomberg that:
“There’s been a big rotation out of emerging markets into U.S. dollar assets.”
“An emerging market is a market you can’t emerge from in an emergency. It’s one of the best lessons I’ve ever learnt in 30 years in the market. When everybody runs for the door at the same time, the door’s very small.”
So 2016 could yet end with a bout of market instability, or worse, as everyone wonders what next year will hold. We’ll be tracking all the main events through the day....
Updated
