World mar­kets roiled as elec­tion up­set seems im­mi­nent

China Daily (USA) - - FRONT PAGE - By REUTERS

The US dol­lar sank and stocks plum­meted as may­hem came to world mar­kets on Wed­nes­day as in­vestors faced the pos­si­bil­ity of a shock win by Repub­li­can Don­ald Trump that could up­end the global po­lit­i­cal or­der.

Ev­ery new TV net­work pro­jec­tion in the US pres­i­den­tial elec­tion showed the race to be far closer than any­one had thought, send­ing in­vestors stam­ped­ing to safe-haven as­sets.

Sov­er­eign bonds and gold surged while the Mex­i­can peso went into near free-fall as sta­tions gave North Carolina to Trump.

“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 0425 GMT, Trump was lead­ing Demo­cratic ri­val Hil­lary Clin­ton by 19 Elec­toral Col­lege votes, with a tally of 228-209, with sev­eral key bat­tle­ground states yet to be de­cided. It takes 270 to win.

US stock fu­tures re­coiled more than 4.5 per­cent, match­ing the car­nage that fol­lowed the Bri­tish vote to leave the Euro­pean Union in June that wiped tril­lions of dol­lars of value off global mar­kets.

In­vestors fear a Trump vic­tory could cause global eco­nomic and trade tur­moil, dis­cour­ag­ing 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 and it was pos­si­ble the Bank of Ja­pan and Euro­pean Cen­tral Bank might be forced to ease pol­icy fur­ther.

South Korean au­thor­i­ties were thought to have in­ter­vened to steady their cur­rency, and deal­ers were won­der­ing if cen­tral banks glob­ally would step in to calm nerves.

The scale of the scare was clear in the Mex­i­can peso, which plunged more than 12 per­cent against the dol­lar in the big­gest daily move in two decades.

“There’s a lot of panic in the mar­ket, it is def­i­nitely an out­come it was not ex­pect­ing,” said Juan Car­los Alderete, a strate­gist at Banorte-IXE.

The peso has be­come a touch­stone for sen­ti­ment on the elec­tion as Trump’s trade poli­cies are seen as dam­ag­ing to its ex­portheavy econ­omy.

But the story was very dif­fer­ent against the safe-haven yen, with the dol­lar shed­ding 3.5 per­cent to 101.70 yen. The euro jumped 2.2 per­cent to $1.1265.

Asian stocks skid­ded, with MSCI’s broad­est in­dex of Asia-Pa­cific stocks out­side Ja­pan down 2.5 per­cent and the Nikkei off nearly 4 per­cent.

With vot­ing com­pleted in more than two-thirds of the 50 US states, the race was still too close to call in Iowa, Michi­gan, Wis­con­sin, Penn­syl­va­nia and New Hamp­shire, states that could be vi­tal to de­cid­ing who wins the pres­i­dency.

Fox News pro­jected Trump had taken Florida and North Carolina, and pro­jected Clin­ton would win Vir­ginia.

Mar­kets have tended to fa­vor Clin­ton as a sta­tus quo can­di­date who would be con­sid­ered a safe pair of hands at home on the world stage.

“In con­trast, a Trump vic­tory would trig­ger mas­sive un­cer­tainty that would likely un­der­mine risk as­sets at least ini­tially, which in turn could pre­clude a Fed rate hike this year,” said Michelle Gi­rard, econ­o­mist at RBS.

Sov­er­eign bonds flew ahead, push­ing yields on 10-year US Trea­sury notes down a huge 13 ba­sis points to 1.74 per­cent, the largest drop since Brexit.


A pedes­trian and fi­nan­cial jour­nal­ist look at their phones as they are re­flected in a win­dow in front of a board dis­play­ing stock prices at the Aus­tralian Se­cu­ri­ties Ex­change (ASX) in Syd­ney, Aus­tralia, on Wed­nes­day.

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