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| Global Markets Plummet as Trump Claims Victory | |
| (about 2 hours later) | |
| The victory for Donald J. Trump in the American presidential election sent global financial markets plunging on Wednesday, as Wall Street futures tumbled as much as 5 percent and stocks in Asia and Europe sold off sharply. | |
| Investors reacted in real time to early results and predictions showing unexpected gains for Mr. Trump in battleground states, as he edged closer to his shocking upset. | |
| Stock market futures pointed to a sell-off looming on Wall Street, with futures on the Dow Jones industrial average poised to open lower by more than 2 percent. . Futures on the broader Standard & Poor’s 500-stock index fell by the 5 percent limit before recovering somewhat. | |
| Markets in Tokyo, Hong Kong, Australia and elsewhere in the region all fell sharply as the Asian trading day came to a close. Markets in London, Frankfurt and Paris opened down more than 2 percent on Wednesday morning. The dollar weakened broadly. | |
| Oil futures fell sharply as investors worried about the impact of new trade friction on global economic growth. Gold, popular among some investors during uncertain economic times, staged a rally. | Oil futures fell sharply as investors worried about the impact of new trade friction on global economic growth. Gold, popular among some investors during uncertain economic times, staged a rally. |
| Markets around the world had mostly priced in a win by Hillary Clinton, the Democratic nominee, in recent weeks, in line with most data-based prediction models. But as the election results trickled in, most models swung from predicting a victory for Mrs. Clinton to predicting one by Mr. Trump, the Republican candidate, prompting the sell-off on new uncertainty. | |
| “Markets are buckling and will continue to,” Richard Dunbar, senior investment strategist at Aberdeen Asset Management in Edinburgh, said on Wednesday. “Most investors had calculated that Clinton would win, and markets are now recalibrating — along fairly predictable lines. There’s a natural flight to quality, with assets such the Japanese yen and gold climbing.” | |
| In Japan, economic officials convened an emergency meeting in response to the swings in financial markets. The Nikkei stock average closed down more than 5 percent while the yen — considered a safe haven by some investors — climbed as much as 3 percent against the dollar. | |
| Masatsugu Asakawa, a deputy minister in the Finance Ministry in charge of currency policy, warned obliquely that Japan could intervene in the market to prop up the yen, as it has done in tumultuous moments in the past. | |
| “We are watching market movements closely,” he told reporters after meeting counterparts at the central bank and the Financial Services Agency. “If speculative moves of the sort we are currently seeing continue, we will take the necessary steps.” | |
| Given that the polls were still fairly close before the elections, a Trump victory would not come as a complete surprise, “but it’s still a big shock,” said Shane Oliver, the head of investment strategy and chief economist at AMP Capital in Sydney, Australia. | |
| “Share markets across the Asian region have sold down heavily as investors worry in particular that his protectionist policies will kick off a trade war and depress growth,” Mr. Oliver said. | “Share markets across the Asian region have sold down heavily as investors worry in particular that his protectionist policies will kick off a trade war and depress growth,” Mr. Oliver said. |
| Trading seesawed, tracking live election returns for battleground states like Florida and Ohio as they swung toward Mr. Trump. | Trading seesawed, tracking live election returns for battleground states like Florida and Ohio as they swung toward Mr. Trump. |
| “We’ve seen reactions to swings back and forth from Hillary to Donald,” Stephen Innes, a senior currency trader at Oanda in Singapore, said in a phone interview, referring to the nominees, Mrs. Clinton and Mr. Trump. | “We’ve seen reactions to swings back and forth from Hillary to Donald,” Stephen Innes, a senior currency trader at Oanda in Singapore, said in a phone interview, referring to the nominees, Mrs. Clinton and Mr. Trump. |
| Mr. Trump’s policies have also irked America’s biggest trading partners. For example, his bold threats to impose steep punitive tariffs on imports from China have raised concerns among leaders in Beijing. But they could also complicate monetary policy making in the United States. | Mr. Trump’s policies have also irked America’s biggest trading partners. For example, his bold threats to impose steep punitive tariffs on imports from China have raised concerns among leaders in Beijing. But they could also complicate monetary policy making in the United States. |
| “A Trump presidency means a weaker dollar, and a higher likelihood the Fed would delay a rate hike in December,” said Julian Evans-Pritchard, China economist at Capital Economics in Singapore. | “A Trump presidency means a weaker dollar, and a higher likelihood the Fed would delay a rate hike in December,” said Julian Evans-Pritchard, China economist at Capital Economics in Singapore. |
| But that could also relieve some of the pressure on China’s currency, which has weakened to six-year lows this year in the face of steady outflows. | But that could also relieve some of the pressure on China’s currency, which has weakened to six-year lows this year in the face of steady outflows. |
| Mr. Trump in recent months has repeatedly accused China of intervening to weaken its currency. But this is not correct. Instead, China’s central bank, the People’s Bank of China, has been spending hundreds of billions of dollars of its foreign reserves to prevent the renminbi from weakening. Mr. Evans-Pritchard said a win by Mr. Trump and the resulting weaker dollar “also takes some pressure off” China’s central bank. | Mr. Trump in recent months has repeatedly accused China of intervening to weaken its currency. But this is not correct. Instead, China’s central bank, the People’s Bank of China, has been spending hundreds of billions of dollars of its foreign reserves to prevent the renminbi from weakening. Mr. Evans-Pritchard said a win by Mr. Trump and the resulting weaker dollar “also takes some pressure off” China’s central bank. |
| Other financial market investors appeared to be waiting to see the impact of actual policy changes. | |
| The impact of a Trump presidency is “hard to predict,” said Hugh Young, the managing director and co-founder of Aberdeen Asset Management Asia. “Nerves might cause a sell-off, but we need to await the reality of the U.S.’s policy moves, and that will take time.” | |
| The steep sell-off on Wednesday followed a spell when investors around the world appeared to have been on edge over the United States election. | The steep sell-off on Wednesday followed a spell when investors around the world appeared to have been on edge over the United States election. |
| In recent weeks, in tune with what appeared to be the improving fortunes of Mr. Trump, the markets took on a darker tone as retail investors pulled money out of equity funds and institutional players unloaded some of their riskier investments such as high-yield bonds. | In recent weeks, in tune with what appeared to be the improving fortunes of Mr. Trump, the markets took on a darker tone as retail investors pulled money out of equity funds and institutional players unloaded some of their riskier investments such as high-yield bonds. |
| Last week, for example, investors pulled $3 billion out of junk bond exchange-traded funds, the largest weekly outflow all year. | Last week, for example, investors pulled $3 billion out of junk bond exchange-traded funds, the largest weekly outflow all year. |
| “Key will now be whether or not Trump will prove to be a populist or a pragmatic president,” said Valentijn van Nieuwenhuijzen, the chief strategist and head of multi-asset investing at NN Investment Partners in Amsterdam. “Still, even a more pragmatic approach will only become visible after some time and the near-term outlook is therefore clouded with geopolitical uncertainty.” | |
| The prospects of a Trump victory seemed to brighten after James B. Comey, director of the Federal Bureau of Investigation, told Congress on Oct. 28 that the agency was examining newly discovered emails from a laptop computer belonging to the estranged husband of a top aide to Mrs. Clinton. Stocks slumped after the news. For the next nine trading days, stocks closed lower, the first such losing streak since 1980. | |
| On Monday, stocks rallied after Mr. Comey said the emails warranted no further action from the F.B.I. The Standard & Poor’s 500-stock index closed 2.2 percent higher and edged up 0.4 percent on Tuesday. | On Monday, stocks rallied after Mr. Comey said the emails warranted no further action from the F.B.I. The Standard & Poor’s 500-stock index closed 2.2 percent higher and edged up 0.4 percent on Tuesday. |
| Over the last three months, the S. & P. index was down 2.5 percent, while the price of gold, traditionally seen as a safe harbor in uncertain times, was up almost 3 percent. | |
| The Chicago Board Options Exchange Volatility Index, or VIX, Wall Street’s so-called fear gauge, rose in late October to its highest levels since the market turmoil that followed Britain’s vote to leave the European Union in June. | |
| The Mexican peso has experienced the brunt of the market’s ups and downs related to Mr. Trump. While the peso has lost 10 percent of its value against the dollar over the last year, the swings have been wild. | The Mexican peso has experienced the brunt of the market’s ups and downs related to Mr. Trump. While the peso has lost 10 percent of its value against the dollar over the last year, the swings have been wild. |
| Whenever Mr. Trump gained ground against Mrs. Clinton, the currency would plunge up to 7 percent against the dollar, only to snap sharply back as Mrs. Clinton pushed ahead. Some 80 percent of Mexico’s exports go to the United States, and the peso is one of the world’s easiest currencies to trade, making it a popular gauge of market sentiment regarding Mr. Trump’s chances. | Whenever Mr. Trump gained ground against Mrs. Clinton, the currency would plunge up to 7 percent against the dollar, only to snap sharply back as Mrs. Clinton pushed ahead. Some 80 percent of Mexico’s exports go to the United States, and the peso is one of the world’s easiest currencies to trade, making it a popular gauge of market sentiment regarding Mr. Trump’s chances. |
| The Mexican central bank said it would hold a joint news conference with the Finance Ministry at 8 a.m. Eastern as the peso weakened sharply against the dollar in trading in Asia on Wednesday. | |
| The dollar has gained on the pound since Britain’s vote to split from Europe, while it has remained flat for the year against the euro and the Japanese yen. | The dollar has gained on the pound since Britain’s vote to split from Europe, while it has remained flat for the year against the euro and the Japanese yen. |
| On Wednesday, the pound reached its highest level against the dollar in a month before giving back some of those gains, while the euro also strengthened against the dollar. | |
| “The Brexit result was a real shock and created instability” in Britain, said Nigel Green, the founder and chief executive of deVere Group, a financial consultancy. “But this is a far bigger deal as this creates instability on a much wider, international scale.” | |
| “The markets’ main concerns include Trump’s protectionist policies, focusing on potential trade wars with China – America’s largest trading partner – and with Mexico, it’s third largest,” he added. | |
| But perhaps the most noticeable trend of the last few months has been the slow but persistent increase in the interest rates of government bonds, many of which have been in negative territory for some time. | But perhaps the most noticeable trend of the last few months has been the slow but persistent increase in the interest rates of government bonds, many of which have been in negative territory for some time. |
| The yield on the benchmark 10-year United States Treasury note rose to 1.86 percent on Tuesday from a low of 1.37 percent in July. | The yield on the benchmark 10-year United States Treasury note rose to 1.86 percent on Tuesday from a low of 1.37 percent in July. |
| And similar bonds issued by Japan and Germany, which this year began offering negative yields, are creeping toward positive territory. | And similar bonds issued by Japan and Germany, which this year began offering negative yields, are creeping toward positive territory. |
| Analysts suggest that this trend may well reflect nascent signs in the developed economies of inflation and increased economic activity. | Analysts suggest that this trend may well reflect nascent signs in the developed economies of inflation and increased economic activity. |
| A view is also taking hold that the next president of the United States is going push hard for an increase in government spending as a way to spur what has been a stagnant economic recovery, and both candidates have spoken out in favor of such an approach. | A view is also taking hold that the next president of the United States is going push hard for an increase in government spending as a way to spur what has been a stagnant economic recovery, and both candidates have spoken out in favor of such an approach. |
| Any move toward a meaningful pickup in infrastructure investing would require more government borrowing and thus put upward pressure on today’s rock-bottom interest rates. | Any move toward a meaningful pickup in infrastructure investing would require more government borrowing and thus put upward pressure on today’s rock-bottom interest rates. |
| Last week, the former United States Treasury secretary Lawrence H. Summers made the case, in a speech at the International Monetary Fund, that with rates at historically low levels and with the increasing chances of the economy entering a recession in the coming years, more government spending is desperately needed. | Last week, the former United States Treasury secretary Lawrence H. Summers made the case, in a speech at the International Monetary Fund, that with rates at historically low levels and with the increasing chances of the economy entering a recession in the coming years, more government spending is desperately needed. |
| “The question of lack of demand should be our preoccupation in thinking about macroeconomic policy going forward,” Mr. Summers said. “And it has a natural solution — issuing debt to support whatever investments the government sees as best.” | “The question of lack of demand should be our preoccupation in thinking about macroeconomic policy going forward,” Mr. Summers said. “And it has a natural solution — issuing debt to support whatever investments the government sees as best.” |
| Governments around the world that are sitting on large piles of cash, Germany for example, are facing similar pressures to take advantage of low rates to borrow and spend to stimulate a more vigorous level of growth. | Governments around the world that are sitting on large piles of cash, Germany for example, are facing similar pressures to take advantage of low rates to borrow and spend to stimulate a more vigorous level of growth. |
| While such policies would also increase debt levels, economists who support Mr. Summers’s policy prescription argue that a trade-off of higher growth is worthwhile, given how low borrowing costs are right now. | While such policies would also increase debt levels, economists who support Mr. Summers’s policy prescription argue that a trade-off of higher growth is worthwhile, given how low borrowing costs are right now. |