Wednesday, 9 November: In case you missed it, Donald Trump is the 45th elected US President, after Hillary Clinton conceded just before 8am. Despite Clinton having momentum in her corner as the polling stations opened yesterday, as the results started to filter in, major swing states seemed to defy the polls, giving Trump the lead. At the time of writing not all states have declared but Trump has 278 votes against Clinton’s 218 (46 of 50 states have declared).
So what does this mean for markets? To begin with here in the UK the FTSE 100 dropped by more than 2% at the open but quickly recovered and has remained stable over the course of the day. Within the index itself the biggest winners were Fresnillo PLC who are involved in silver mining and Gold producing in Mexico (more on Mexico later). Fresnillo earns all of its revenue in US dollars, through the sale of gold and silver, and incurs a lot of its costs in Mexican Pesos. Pharmaceuticals and miners were also on the up, but it was the construction rental company Ashtead Group who led the field in afternoon trading. The shares climbed on the hopes of higher US infrastructure spending following Trump’s win as the businessman has previously signalled in doing so. Ashtead were c.13% higher intra-day before paring back slightly to end the day +11.51%.
In forex markets one of the biggest movers of the day was the Mexican Peso against the dollar. The dollar gained more than 13% overnight putting the green note to its highest level on record against the peso. The peso has been more reactive to the election story due to Trump’s immigration views, whilst also threatening to impose high tariffs on major US trading partners, threatening Mexico’s economy.
Investors’ flock to “safe haven” assets strengthened both the Japanese Yen and Gold. The dollar dropped vs the yen as investors flocked to the asset: USD/JPY was just shy of ¥101.5 in the early hours of this morning but after the initial shock had worn off the dollar recovered most of the weakness and currently trades at ¥104.6. However the currency movement overnight led to the Nikkei closing -5.36%, as the stronger yen dragged down export-related names. The Tokyo stock market closed before the election results were announced.
Gold spiked more than 5% higher, once again in the early hours of this morning as the initial reaction of the election was to race to non-yielding safe haven asset. Again though, the asset has given up some of these gains and now sits just less than 1% higher at $1,283 per oz (at the time of writing).
The talk of 2016 in the US (alongside the Presidential election) has been for a rate rise by the Fed. The Fed last implemented a rate rise in December 2015 and after speculation of 4 further rate rises over the course of 2016, there remains one last Fed meeting in December to once again pull the trigger. So what has all this done to the likelihood of a US rate rise when the Fed meet again on December 14th? Yesterday’s probability of a rate rise had been 76% – today it has fallen to just shy of 67%. The other question is will Janet Yellen remain in her position as the Federal Reserve chair? Janet Yellen’s current term as Chair of the Fed is set to run till January 2018 but the suggestion of whether she remains, or stays till then, only adds to the uncertainty the US election result has brought.
Markets in the US shrugged off a shaky start and both the Dow Jones and S&P 500 are in the green by more than 1%. The FTSE 100 ended the day higher by 1%. The FTSE 250 closed +0.82% whilst in Europe the CAC 40 in Paris closed +1.49% and the DAX in Germany +1.56%. Brent oil is higher by 1.75% at $46.81/bbl.