Trump Victory Roils Riskier Assets

European stock markets are broadly down following the Trump victory in the U.S. Presidential Election. Trump ran on a populist vote, tapping into the anger many feel about jobs and trade.  Almost nobody in the politic arena saw this coming, which has led to a selloff in riskier assets.  Trump carried nearly all the battleground states he needed to win, including Florida, Ohio, and Pennsylvania. Republicans also kept the House and the Senate which will provide the backdrop for a robust honeymoon period for President Elect Trump.

The DAX was down approximately 1% but the FTSE 100 was only slightly lower. The 10-year yield pushed above 1.9%, to levels not seen since April of 2016. Eurozone peripherals are underperforming and the Spanish IBEX is down 2.17%, while the Italian MIB declined 2.00% as risk aversion prevails and Eurozone peripherals are once again being dragged into the general bout of risk aversion.

The ECB has signaled vigilance, and while officials also stressed the need to keep a clear head, the chances of a follow up program to the current QE schedule are rising and the risk of a tapering of the monthly purchase schedule is receding. U.S. stock futures are also heading south, after Asian markets already closed clearly in the red. Japanese markets underperformed as the Yen strengthened and the Nikkei closed with a 5.4% loss, while Hang Seng and ASX closed -2.2% and -1.9% lower on the day. Oil prices meanwhile are up from lows and little changed on the day, with WTI currently trading at USD 45.00 per barrel.

The currency markets saw a huge selloff in the Mexican Peso which dropped more than 9%, while the yen, euro and pound were all stronger against the greenback.  Gold prices soared to 1,337, but has come off after hitting those highs and is trading near the 1,306 level. Donald Trump’s trade policies are an unknown, and he made several statements during his campaign which could generate significant volatility.  Mexico, who is the U.S. second largest trading partner, will feel the pinch.

In the U.K., the BoE’s latest agency survey found investment plans holding up despite the vote to leave the EU, but the report also carried warnings. The survey was conducted between August and mid-October and found business sentiment to have rebounded from the July lows, which were seen in the immediate wake of the Brexit vote, but remained relatively fragile amid significant uncertainty around the long-term outlook.