Market turmoil eases as investors weigh trump’s plan for economy

Hong Kong: Turbulence in financial markets calmed after a knee-jerk selloff in stocks and rally in haven assets as investors reassessed the effects of Donald Trump’s surprise victory in the United States presidential election.
After initially sliding the maximum allowed, futures on the S&P 500 Index pared losses along with European equities, while the yen and gold scaled back gains. The spread between five- and 30-year Treasury yields widened amid speculation Trump as president would increase spending to spur economic growth, and swaps traders cut wagers on a Federal Reserve interest-rate hike next month.
Mexico’s peso led emerging-market currencies lower amid concern U.S. trade policies will become more protectionist. “It’s an amazingly impressive recovery off the lows for risk assets,” said Craig Collins, managing director of rates trading at Bank of Montreal in London.
“It’s very surprising given the feel the session had to start with, that it was a massive risk-off flight to quality bid. Now the early losses are getting erased and it looks like it could go unchanged on the day by the time the US gets in.”
A Trump victory had been portrayed by analysts as having the potential to unhinge markets banking on a continuation of policies that coincided with the second-longest bull market in S&P 500 history. Going into the vote, most polls showed Democratic candidate Hillary Clinton ahead and websites that took bets on the victor had put her odds of winning at 80 per cent or more.
Trump has pledged to clamp down on immigration to the US and renegotiate free-trade agreements with countries including Mexico. In his victory speech, he pledged to focus on rebuilding US infrastructure.
S&P 500 futures tumbled by the maximum 5 percent loss permitted on the Chicago Mercantile Exchange before trading curbs are triggered, then pared their decline to 1.6 per cent n London. The restrictions last came into force in the wake of the Brexit vote and set a floor price for the contracts through the remainder of the overnight trading session.
Futures on the S&P 500 Index plunged by a 5 percent limit that triggers trading curbs and contracts on European equities sank more than 4 percent. Gold had its biggest move since the aftermath of Britain’s shock vote to leave the European Union, surging with haven assets including the yen and sovereign bonds. Mexico’s peso tumbled the most since 2008 amid concern U.S. trade policies will become more protectionist under Trump.
Trump was projected to be the winner early Wednesday by the Associated Press and television networks after Wisconsin pushed him over the 270 Electoral College vote threshold needed to become president-elect. The Republicans also retained control of Congress.
A Trump victory had been portrayed by analysts as having the potential to unhinge markets that were banking on a continuation of policies that coincided with the second-longest bull market in S&P 500 history. Brexit was the last major political shock and led to the US equity gauge sliding 5.3 per cent in two days.