Rand rat­tled by Trump win

Lesotho Times - - Business -

JO­HAN­NES­BURG — South Africa’s rand tum­bled as much as four per­cent on Wed­nes­day along with other emerg­ing mar­ket cur­ren­cies af­ter in­vestors were rat­tled by a shock win for Repub­li­can Don­ald Trump in the fiercely-con­tested U.S. election.

Trump scored a sur­pris­ing win over Demo­crat Hil­lary Clin­ton, open­ing a path to the White House for the po­lit­i­cal out­sider seen as a risk to global growth as he has pledged to rene­go­ti­ate trade deals, im­pose high im­port tar­iffs and stirred fears of a cur­rency war with China.

“The ques­tion now is what will a Trump vic­tory mean for the per­for­mance of SSA (sub-sa­ha­ran Africa) mar­kets. Near-term in any risk off environment, the ZAR (rand) is likely to be most im­pacted,” said Razia Khan, chief econ­o­mist, Africa at Stan­dard Char­tered bank.

“As the mar­ket fo­cus grad­u­ally shifts to the kind of pol­icy we are likely to see, and the im­pli­ca­tions of a Repub­li­can Con­gress and Pres­i­dency both in favour of fur­ther fis­cal stim­u­lus, there are likely to be more mean­ing­ful im­pli­ca­tions for SSA mar­kets.”

The US dol­lar, Mex­i­can peso and world stocks be­gan to steady in the Euro­pean morn­ing yes­ter­day, hav­ing been ham­mered overnight as Don­ald Trump swept to vic­tory in the US pres­i­den­tial election.

Euro­pean shares were down less than 1% and in­vestors were re­turn­ing to other mar­kets that had been sent into a tail­spin as it be­came clear the Trump was set for a dra­matic vic­tory over heav­ily favoured Demo­crat Hil­lary Clin­ton.

In­vestors fear a Trump vic­tory could cause global eco­nomic and trade tur­moil and years of pol­icy un­pre­dictabil­ity, which among other things will dis­cour­age the Fed­eral Re­serve from rais­ing in­ter­est rates in De­cem­ber as long ex­pected.

“I love this coun­try,” Trump said in a vic­tory speech in New York. “Amer­ica will no longer set­tle for any­thing less than the best.... We have a great eco­nomic plan, we will dou­ble our growth and have the strong­est economy in the world.”

Sov­er­eign bonds, the Ja­panese yen and gold were all giv­ing back ground hav­ing surged as the state re­sults had come in overnight and also sent the Mex­i­can peso into near free fall as once again polls and bet­ting mar­kets proved woe­fully wrong.

Trump’s threats to rip up a free trade agree­ment with Mex­ico and to tax money sent home by mi­grants to pay for build­ing a wall on the south­ern US bor­der have made the peso par­tic­u­larly re­ac­tive to events in the race for the White House.

The mild re­ac­tion from Euro­pean stocks was nowhere near as bad as fu­tures mar­kets had in­di­cated and there were signs that the dol­lar, as well as other cur­ren­cies and as­set classes hit hard overnight, were be­gin­ning to level out.

Overnight in Syd­ney, Sean Cal- low, a forex strate­gist at West­pac, had said the mar­ket re­ac­tion had been “as though the four horse­men of the apoc­a­lypse just rode out of Trump Tower”.

The mood in early Euro­pean trade was more mea­sured, how­ever.

“The ini­tial re­ac­tion in mar­kets was vi­o­lent,” Saxo Bank’s head of forex strat­egy, John Hardy, said. “But if you look at it across mar­kets you are see­ing a pretty de­cent re­ver­sal off the spike.”

In the Euro­pean morn­ing, the ef­fect was far weaker than the re­ac­tion to Britain’s vote to leave the EU in June that wiped tril­lions of dol­lars off world mar­kets.

US stock fu­tures were point­ing to a drop of about a 2% for Wall Street later, less than half the 5% they had been warn­ing of in Asian trade.

Trade risks As forex mar­kets reeled, South Korean au­thor­i­ties were thought to have in­ter­vened to steady their cur­rency, and deal­ers won­dered if cen­tral banks glob­ally would step in to calm nerves.

Ja­pan’s top cur­rency diplo­mat sig­nalled Tokyo’s readi­ness to in­ter­vene if nec­es­sary as the surg­ing yen threat­ened to snuff out its frag­ile eco­nomic re­cov­ery.

The scale of the scare was clear in the Mex­i­can peso, which plunged more than 13% against the dol­lar at one point in the big­gest daily move in two decades.

It was still down 9% by 9.45am GMT.

“A lot of Trump’s neg­a­tive geopo­lit­i­cal rhetoric was con­cen­trated around Mex­ico and trade with Mex­ico and tear­ing up Nafta [the North Amer­i­can Free Trade Agree­ment], so the peso just be­come this nat­u­ral barom­e­ter of the election,” said Deutsche Bank emerg­ing-mar­ket forex strate­gist Gau­tam Kalani. “What hap­pens now though is all up in the air.”

The risk of a global trade war like­wise ham­mered cur­ren­cies across Asia, with the Aus­tralian dol­lar lead­ing the rout.

The story was very dif­fer­ent against the safe-haven yen, with the US dol­lar shed­ding as much as 3.3% to ¥101.85. The euro jumped 2.3% to $1.1278 as well — al­though both were some way from their highs in Europe of ¥103.51 and $1.1108 for the euro.

Un­cer­tainty Asian stocks took the big­gest blows, with MSCI’S broad­est in­dex of Asia-pa­cific stocks out­side Ja­pan fall­ing 2.3% and the Nikkei in Tokyo clos­ing down 5.4%.

A wealthy real-es­tate de­vel­oper and for­mer re­al­ity TV host, Trump rode a wave of anger to­ward Wash­ing­ton in­sid­ers to win the White House race against Clin­ton, the Demo­cratic can­di­date

whose gold-plated es­tab­lish­ment re­sume in­cluded stints as a first lady, US se­na­tor and sec­re­tary of state.

Mar­kets had favoured Clin­ton as a sta­tus quo can­di­date who would be con­sid­ered a safe pair of hands at home on the world stage. An­a­lysts had no such cer­tainty about Trump whose pow­ers could be bol­stered by the Repub­li­can’s con­trol of the Se­nate.

“With Brexit we had one bad day but this is dif­fer­ent. This is what’s scary about putting the most pow­er­ful po­si­tion in the world in the hands of a man who many be­lieve is tem­per­a­men­tally un­sta­ble,” said Don­ald Selkin, chief mar­ket strate­gist at Na­tional Se­cu­ri­ties in New York.

“His tax cuts could open up a huge in­crease in the bud­get deficit and his trade sanc­tions could in­ter­rupt world trade. This could put us in a re­ces­sion.”

Sov­er­eign bonds flew ahead, push­ing yields on 10-year US trea­sury notes down as much as 12 ba­sis points to 1.75% at one point, again the largest drop since the Brexit vote, only to whip right back up 1.87% in Euro­pean trade.

In com­mod­ity mar­kets, safe-haven gold saw big swings too, ini­tially climb­ing 3.5% to $1,320/oz as the dol­lar slid, but then slid­ing back to set­tle below $1,300.

Oil dropped on con­cerns over the global eco­nomic out­look.

US crude shed $1.30 to $43.68 a bar­rel at its low­est, while Brent fell $1.15 to $44.89 be­fore claw­ing back to $45.50 bar­rel.

— Reuters

Newspapers in English

Newspapers from Lesotho

© PressReader. All rights reserved.