Thursday 8 December 2016

Economy: World markets, dollar, peso in turmoil on back of Trump victory

* Dollar dives as investors face risk of shock Trump win
* Asia shares slump, US S&P 500 futures skid in Brexit re-run
* Mexican peso hits lifetime low as safe-haven yen and euro gain
* Markets sharply lengthen odds on Fed hike in Dec, bonds rally
* Safe-haven yen and gold surge while oil slips

By Wayne Cole and Marc Jones

Published 09/11/2016 | 02:28

Donald Trump
Donald Trump

THE US dollar sank and stocks plummeted in market mayhem on Wednesday as investors faced up to a shock win for Donald Trump in the U.S. presidential election that could upend the global political order.

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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.

Sovereign bonds, the Japanese yen and gold surged while the Mexican peso went into near free-fall in chaotic trading as once again polls and betting markets proved woefully wrong.

"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."

As of 0742 GMT, news networks were calling the election for Republican candidate Trump and CNN reported that his Democrat rival Clinton had conceded.

NEW YORK, NY - NOVEMBER 09: Republican president-elect Donald Trump delivers his acceptance speech during his election night event at the New York Hilton Midtown in the early morning hours of November 9, 2016 in New York City. Donald Trump defeated Democratic presidential nominee Hillary Clinton to become the 45th president of the United States. (Photo by Joe Raedle/Getty Images)
NEW YORK, NY - NOVEMBER 09: Republican president-elect Donald Trump delivers his acceptance speech during his election night event at the New York Hilton Midtown in the early morning hours of November 9, 2016 in New York City. Donald Trump defeated Democratic presidential nominee Hillary Clinton to become the 45th president of the United States. (Photo by Joe Raedle/Getty Images)
NEW YORK, NY - NOVEMBER 09: Republican president-elect Donald Trump delivers his acceptance speech during his election night event at the New York Hilton Midtown in the early morning hours of November 9, 2016 in New York City. Donald Trump defeated Democratic presidential nominee Hillary Clinton to become the 45th president of the United States. (Photo by Spencer Platt/Getty Images)
NEW YORK, NY - NOVEMBER 09: Republican president-elect Donald Trump delivers his acceptance speech during his election night event at the New York Hilton Midtown in the early morning hours of November 9, 2016 in New York City. (Photo by Mark Wilson/Getty Images)
Chairman of the Republican National Committee (RNC) Reince Priebus (R) hugs Republican presidential elect Donald Trump during election night at the New York Hilton Midtown in New York on November 9, 2016. / AFP PHOTO / JIM WATSONJIM WATSON/AFP/Getty Images
People cheer as voting results for Florida come in at Republican presidential nominee Donald Trumps election night event at the New York Hilton Midtown on November 8, 2016 in New York City. (Photo by Chip Somodevilla/Getty Images)
Republican presidential elect Donald Trump gestures while speaking during election night at the New York Hilton Midtown in New York on November 9, 2016. Photo: Getty
Republican presidential elect Donald Trump (L) gestures next to his family as he arrives to speak during election night at the New York Hilton Midtown in New York
Republican president-elect Donald Trump embraces his wife Melania Trump during his election night event at the New York Hilton Midtown in the early morning hours of November 9, 2016 in New York City. Donald Trump defeated Democratic presidential nominee Hillary Clinton to become the 45th president of the United States. (Photo by Chip Somodevilla/Getty Images)
Republican president-elect Donald Trump embraces his wife Melania Trump during his election night event at the New York Hilton Midtown in the early morning hours of November 9, 2016 in New York City. (Photo by Chip Somodevilla/Getty Images)
NEW YORK, NY - NOVEMBER 09: Reince Priebus, chairman of the Republican National Committee, delivers a speech as Republican president-elect Donald Trump looks on during his election night event at the New York Hilton Midtown in the early morning hours of November 9, 2016 in New York City. Donald Trump defeated Democratic presidential nominee Hillary Clinton to become the 45th president of the United States. (Photo by Chip Somodevilla/Getty Images)
Reince Priebus, chairman of the Republican National Committee, delivers a speech as Republican president-elect Donald Trump looks on during his election night event at the New York Hilton Midtown in the early morning hours of November 9, 2016 in New York City. Donald Trump defeated Democratic presidential nominee Hillary Clinton to become the 45th president of the United States. (Photo by Mark Wilson/Getty Images)
Republican presidential elect Donald Trump (L) arrives with his family on stage to speak during election night at the New York Hilton Midtown in New York on November 9, 2016. Trump stunned America and the world Wednesday, riding a wave of populist resentment to defeat Hillary Clinton in the race to become the 45th president of the United States. / AFP PHOTO / MANDEL NGANMANDEL NGAN/AFP/Getty Images
NEW YORK, NY - NOVEMBER 09: Republican president-elect Donald Trump gives greets people in the crowd after delivering his acceptance speech at the New York Hilton Midtown in the early morning hours of November 9, 2016 in New York City. Donald Trump defeated Democratic presidential nominee Hillary Clinton to become the 45th president of the United States. (Photo by Chip Somodevilla/Getty Images)
Campaign chairman John Podesta speaks on stage at Democratic presidential nominee former Secretary of State Hillary Clinton's election night event at the Jacob K. Javits Convention Center November 9, 2016 in New York City. Clinton is running against Republican nominee, Donald J. Trump to be the 45th President of the United States. (Photo by Drew Angerer/Getty Images)
Hillary Clinton tweeted "Whatever happens tonight, thank you for everything."/ Pic via @HillaryClinton
A graphic depicting Hillary Clinton and Donald Trump squaring off in a boxing ring sits in Times Square on November 8, 2016 in New York City. (Photo by Michael Reaves/Getty Images)
The Trump family and team watch the results (Photo: Twitter/Donald Trump)
Jake Krupa colors in an electoral map as states projected for Republican presidential candidate Donald Trump or Democratic Presidential candidate Hillary Clinton at an election watching party in Coconut Grove, Florida. AFP PHOTO / RHONA WISERHONA WISE/AFP/Getty Images
The dollar tumbled against the yen and euro while the Mexican peso fell off a cliff as polling results in the knife-edge US presidential race pointed to a strong showing by Donald Trump. AFP PHOTO / BEHROUZ MEHRIBEHROUZ MEHRI/AFP/Getty Images
Ivanka Trump tweets: "Such a surreal moment to vote for my father for President of the United States! Make your voice heard and vote! #Election2016" Pic via Twitter/ @IvankaTrump
People watch voting results at Democratic presidential nominee former Secretary of State Hillary Clinton's election night event at the Jacob K. Javits Convention Center (Photo by Aaron P. Bernstein/Getty Images)
A woman reacts as she watches voting results at Democratic presidential nominee former Secretary of State Hillary Clinton's election night event at the Jacob K. Javits Convention Center. (Photo by Win McNamee/Getty Images)
People cheer at Republican presidential nominee Donald Trumps election night event at the New York Hilton Midtown on November 8, 2016 in New York City. (Photo by Chip Somodevilla/Getty Images)
An employee of a foreign exchange trading company stands in front of a monitor displaying Democratic presidential nominee Hillary Clinton (L) and Republican presidential nominee (Photo by Yuya Shino/Getty Images)
A police officer stands outside Trump Tower in New York City on election day November 8, 2016. / AFP PHOTO / DOMINICK REUTERDOMINICK REUTER/AFP/Getty Images
People vote on the US presidential election at Santa Monica City Hall on November 8, 2016 in Santa Monica, California / AFP PHOTO / Frederic J. BROWNFREDERIC J. BROWN/AFP/Getty Images
Nicolette Janoski displays a sticker after voting on November 8, 2016 in Fort Worth, Texas. (Photo by Ron Jenkins/Getty Images)
Voters cast ballots at a laundrette in Chicago, Illinois Picture: AFP/Getty
People cheer as voting results for Iowa come in at Republican presidential nominee Donald Trumps election night event at the New York Hilton Midtown on November 8, 2016 in New York City. (Photo by Chip Somodevilla/Getty Images)
Donald Trump’s son Eric glances across at the ballot being filled by his wife Lara Yunasska while voting at the 53rd Street Library in New York. Photo: Bloomberg
A man poses for a picture near the cardboard cutouts of U.S. presidential nominees Hillary Clinton (L) and Donald Trump, at an election event hosted at the U.S. ambassador's residence in Kathmandu, Nepal November 9, 2016. REUTERS/Navesh Chitrakar
Supporters of U.S. Democratic presidential nominee Hillary Clinton react at her election night rally in Manhattan, New York, U.S., November 8, 2016. REUTERS/Shannon Stapleton
A supporter of Democratic presidential nominee Hillary Clinton bows her head at an election night rally in New York, U.S., November 8, 2016. REUTERS/Carlos Barria
A supporter of Republican presidential candidate Donald Trump holds up a Trump doll during an election night party at a hotel in downtown Phoenix, Arizona on November 8, 2016. / AFP PHOTO / Laura SegallLAURA SEGALL/AFP/Getty Images
People watch elections results during election night at the Jacob K. Javits Convention Center in New York on November 9, 2016. / AFP PHOTO / DON EMMERTDON EMMERT/AFP/Getty Images
People gather around Times Square to view televised results of the US presidential election on November 9, 2016 in New York. / AFP PHOTO / EDUARDO MUNOZ ALVAREZEDUARDO MUNOZ ALVAREZ/AFP/Getty Images
Supporters of U.S. Democratic presidential nominee Hillary Clinton react at her election night rally in Manhattan, New York, U.S., November 8, 2016. REUTERS/Lucas Jackson TPX IMAGES OF THE DAY
A man leans out of a Hummer shouting words in support of U.S. Republican presidential nominee Donald Trump while driving through Times Square in New York, U.S., November 9, 2016. REUTERS/Mark Kauzlarich

U.S. stock futures dived 5 percent at one point, worse than the carnage caused by the British vote to leave the European Union in June that wiped trillions of dollars off world markets.

Investors fear a Trump victory could cause global economic and trade turmoil and years of policy unpredictability, which among other things will discourage 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 <0#FF:> and it was possible the Bank of Japan and European Central Bank might be forced to ease policy yet further.

With FX markets reeling, 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 at one point in the biggest daily move in two decades.

"A lot of Trump's negative geopolitical rhetoric was concentrated around Mexico and trade with Mexico and tearing up the NAFTA agreement, so the peso just become this natural barometer of the election," said Deutsche Bank EM FX Strategist Gautam Kalani.

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 as much as 3.3 percent to 101.85 yen. The euro jumped 2.3 percent to $1.1278 as well though both had started to nudge off their highs as Europe opened.

MAXIMUM UNCERTAINTY

Asian stocks skidded, with MSCI's broadest index of Asia-Pacific stocks outside Japan down 2.5 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.

News channels projected Trump's Republicans had retained control of the U.S. Senate.

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 as much as 12 basis points to 1.75 percent, again the largest drop since Brexit, though they too pared back slightly to stand at 1.80 percent by 0715 GMT.

In commodity markets, safe-haven gold climbed 3.5 percent to $1,320 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 at its lowest, while Brent fell $1.15 to $44.89 before it steadied and clawed back to just above $45 barrel.

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