President Elect Trump Calms Markets
MarketPulse | Nov 09, 2016 04:33AM ET
Markets react positively to President-Elect Trump’s victory speech after a tumultuous day in Asia.
Well what most thought could never happen, has! The black (orange) swan event that was unthinkable by most 24 hours ago with Donald Trump sweeping to power. The mornings market moves need no explaining with a panic sell-off in equities, the USD and selected emerging market currencies as things did not go to plan election wise.
Trump’s speech was looked at with some trepidation after Clinton conceded. Surprisingly for many his tone was conciliatory both domestically and internationally. The markets appear to like what he has said. Notably the use of fiscal policy to rebuild infrastructure. It is still far too soon to draw a definitive view as to whether this rally in risk has legs and we should note that most of the world is still solidly in the red on the day.
Looking around at a few standouts….
USD/MXN
Where angels fear to tread. The most obvious victim of a Trump victory the peso was down 13% at one stage, post-speech it has gained 5 % but is still 7% down on the day.
USD/JPY
Another high beta to Trump as USD fled into JPY and saw USD/JPY collapse to 101.20 at one stage. It has made back nearly half of its losses. Late in the day, Japanese officials started making noises about monitoring markets. Should USD/JPY move to 100/101 in a disorderly manner again, expect more of the same and possibly some BoJ “checking of USD/JPY” levels.
SPX500
At one stage the futures were limit down at 5%. Has since rallied as European equities have opened relatively steady post-Trump speech.
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Japan 225
Down 1300 points in a straight line this morning as the unthinkable started to happen. The Nikkei is a proxy to much of the rest of Asia to Trump, as its markets are much more open and liquid then much of the regions. Again, another storming comeback following USD/JPY higher.
Germany 30-Year
Opened 3% lower just before Trump started speaking and quickly made 1.5% of it back along with the FTSE 100. The euro zone and its bond markets may benefit from safe-haven flows out of the USA as strange as this may seem.
USD/CNH
Led the way this morning with USD/CNH trading above 6.8000 even before the polls really started closing on the East Coast. Has been relatively steady all day, suspicious in itself. One suspects the PBOC has been on top “smoothing” things out to make sure it didn’t get out of hand. It seems to have worked. For now at least.
Gold
The safe haven of safe haven’s unsurprisingly got a huge boost today. Rallying over $40 at one stage to near 1340 before falling back with other risk assets. I noted in my piece yesterday, that no matter how noisy it got to keep a focus on the big levels. Those levels at 1260 and 1330 remain intact as we speak. Again one needs to watch a daily close above or below from a technical perspective.
Summary
The dust has settled on a tremendously volatile day. Risk assets, commodities, and stocks and the USD were all aggressively sold as the results came in before rallying on a Trump victory speech. It will be tough to make too many longer term judgments in the next 24 hours. More than likely from here, we will see some consolidation as the street collectively catches its breath before pondering the what’s next?
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