Following Donald Trump’s victory in the 2016 US Election, UK and European markets are taking stock after sharp falls in the opening hours.
The Financial Times Stock Exchange, commonly referred to as the FTSE 100 index dropped by 2% when trading began before trade fell to 0.7% by midday. Stock markets across Europe also fell, with money being pumped into safe haven stocks, invested in gold and currencies such as the Japanese Yen.
Trump’s victory has surprised many; it was assumed by the American public and traders alike that Clinton would emerge victorious, and become America’s first female President.
After heavier falls when trading began, France’s Cac index dropped by 1.5%, with Germany’s Dax index assumed to be approximately the same.
Trump’s shock victory has been widely compared to the recent Brexit vote by analysts, however neither markets nor currencies have been as widely affected as they were after the EU Referendum in June.
As Trump rose prominently into the lead, US stock futures fell catastrophically overnight, however the Dow Jones index is now expected to lose 2%, just above the previous 4% expectation. This is approximately 400 points when it reopens.
Meanwhile in the East, markets across Asia have been described as being a “sea of red” before their losses narrow by close of business on Wednesday. In Japan, Nikkei 225 finished 5.4% lower, however in Hong Kong, Hang Seng and the Shanghai Composite lost 2.2% and 0.6% respectively. The Shanghai Composite would close soon after.
A fall in the British market was to be expected – the FTSE expected it to be approximately 4%. Indications were wrong – this was a long way from the fall that occurred after Brexit was passed, and mild after the heavy sell-off which took place across Asian markets overnight. In the weeks that followed, markets would recover the ground lost, and the FTSE 100 would work its way towards an all time high.
In the wake of Trump’s victory, investors attempted to choose ‘winners’ – Gold and other commodities were up, while shares which may be affected by trade wars fell drastically. In the end though, the only verdict which can be drawn is down to confusion. The markets are clueless to a Trump Presidency, and when nobody knows the direction of the world’s economy to come, investment becomes difficult.
An analyst at City Index cited, “This suggests that a win for President Trump is not yet America’s Brexit moment. US Treasuries have reversed earlier gains, and yields are rising.”
Pharmaceutical firms benefitted, as did defence and miming companies, while banks and retailers felt the negative effects of the result. Speaking to the BBC, Ben Ritchie, a senior fund manager at Aberdeen Asset Management, commented, “What you’re seeing is healthcare companies which had been threatened by some of Hillary Clinton’s policies actually recovering quite strongly. Companies like Astra Zeneca, GlaxoSmithKline are very big parts of the FTSE.”
The pound has strengthened against the dollar, with an increase of 0.6% to put it above $1.24. The Euro also finds itself strengthened against the dollar, sitting comfortably at 0.6% above it. Europe isn’t the only continent to feel the benefit; in Japan, the yen has been strengthened by 2% against the dollar.
Gold rose by 5%, the biggest one day rise since Brexit, before dropping back down to 2%, settling at $1,300.80 an ounce.
Speaking to the BBC, Jim Rogers, a US Investor who believed Trump would emerge victorious, blamed the hits on US assets on Trump’s foreign policy. He commented, “Just about everything will go down. It’s going to rattle people because he talks about trade wars.”
The potential impact of a Trump Presidency on Mexico saw the peso fall over 13% overnight, its lowest level in twenty years. Mexico is expected to suffer due to Trump’s pledge to build an apparent ‘wall’ along the America/Mexico border, and renegotiate the two countries’ trade agreement.