Stock markets and currencies around the world reacted sharply Wednesday morning to news that Republican Donald Trump will be the next president of the U.S.
Safe haven assets such as gold and currencies rallied as the result of the election unfolded, showing not only likely victory for Mr. Trump, but that the Republican Party is also set to retain the Senate and House.
The Nikkei 225 was down more than 5% Wednesday morning, while the perceived safe haven of the Japanese yen was down 0.6% vs. the dollar. The FTSE All-Share index was up about 0.9% since market open, while the pound sterling was up 0.4% vs. the dollar.
The Mexican peso was down 7.4% vs. the dollar by 4:30 p.m. EST. The Central Bank of Mexico announced via its Twitter feed that it would hold a joint press conference with the government.
Gold rallied Wednesday morning, up 1% before settling for a 0.1% gain at the end of trading.
Stock index futures also were initially roiled. S&P 500 futures and Nasdaq 100 futures plunged more than 5% late Tuesday. The Dow recovered with a large reversal, ending trading on Wednesday up 256.95 points, a 1.4% increase. The S&P 500 closed Wednesday up 1.11%, the same as the Nasdaq.
The unexpected result of the presidential race was reflected by money manager news releases, as they predicted a period of uncertainty for markets and investors. Many likened the outcome of the election to the shock vote by the U.K. to leave the European Union.
“Contrary to polling expectations, and reminiscent of the U.K. vote for Brexit, Donald Trump has won the U.S. presidential election as those feeling left behind by technological change and globalization registered their discontent and desire for a different approach,” said Peter Hensman, global strategist for the real return team at Newton Investment Management, London, in a news release. “Markets reacting with shock to the outcome as the uncertainty around quite what a Trump presidency stands for reverberates around the world.”
Neuberger Berman executives said an interest rate hike by the Federal Reserve, priced as almost a certainty on Monday, may now be off the cards. “After one of the most bitter and divisive U.S. presidential election campaigns in living memory, the outcome is arguably the one that markets were dreading,” said a news release by Joe Amato, president and chief investment officer-equities, and Erik Knutzen, chief investment officer-multiasset class. “Whereas (Ms.) Clinton was the business-as-usual candidate, (Mr.) Trump is much less predictable. Regardless of what the longer-term impact of his policies will be on the economy, risk assets are likely to respond with high levels of volatility in the shorter term as we try to figure out what those policies are and how many of them are realistic.”