Big swings have been a hallmark, caused by everything from the 1994 “tequila crisis” where Mexico devalued the peso to Russia’s default on its debt in 1998.
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“That the reaction seen thus far appears to have been much more tempered is probably due to the emollient and conciliatory nature of Trump’s acceptance speech, and the fact that there was always that nagging doubt that the pollsters may well be wrong”, said Michael Hewson, chief markets analyst at CMC Markets.
The solid gains marked a reversal from earlier in the day, when global stock markets were roiled after it became clear that Trump had sealed the win over Hillary Clinton.
TRUMP BOUNCE: The upcoming Trump presidency, which will commence on January 20, put many investors in a buying mood, giving many global stock indexes a lift early Thursday.
“Emerging markets will just get annihilated”.
The more cautiously positive mood that emerged on USA and European markets came too late for stocks in Asia, which fell sharply as Trump’s overnight victory took shape during the Asian trading day. Dow futures were down 2.1%, S&P 500 futures were 2.3% lower and Nasdaq futures lost 2.7% at around 6.30 a.m. ET.
Shares are mostly higher in Tokyo and other Asian markets as USA polls begin to close in the culmination of a highly charged presidential race.
Trump has talked relentlessly about rebuilding America’s infrastructure.
The major Stock Markets of Europe such as Cac Index in Paris and Germany’s Dax in Frankfurt also demonstrated a plunge at the beginning of the trading hours before gaining some momentum and is now demonstrating a dip of about 1.2%. The euro dipped to $1.08905, compared to $1.1025 before the US elections.
The unit – as well as the Mexican stock market – has been hammered by fears Trump will follow through on campaign pledges to renegotiate the North American Free Trade Agreement, as well as pressure the country to pay billions of dollars for a giant border wall.
In other currencies, the Mexican peso was steady after declining 8 percent versus the dollar on fears Trump would cancel favorable trade deals with Mexico.
The American dollar also recouped some ground, while assets that many investors search out at times of uncertainty, such as gold and the Swiss franc, came off earlier highs.
Weaker emerging-market currencies hurt investors counting their returns in US dollars because they make each rand’s worth of South African stock worth fewer dollars. Northrop Grumman climbed 5.1 percent, while Lockheed Martin rose 5.7 percent.
The South Korean won KRW= fell to its lowest level in more than four months on the dollar’s strength and concerns about Trump’s foreign policy and his commitment to security in East Asia.
“What bothers the markets are uncertainties about a new president, his issues of trade, and people are anxious about how other world actors will react to a Trump presidency”, if he wins, said Strategas head of policy research Dan Clifton. It at least gives them pause if they want to cut rates in hopes of boosting their economies.
What accounts for the turnaround in market sentiment?
Asian and European trading screens were initially awash with red Wednesday as the regions’ investors were the first to react to news that the firebrand tycoon had defeated market favorite Hillary Clinton. Copper futures rallied 1.66%; iron ore spiked 3.65%, while zinc gained 0.40%.
Financial shares posted the biggest increases on the Topix on speculation their businesses will improve under a Trump presidency.
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Throughout the summer and into the fall, USA markets were relatively quiet as investors became confident that Clinton would win.
