European shares drop on Trump win

The US dollar, Mexican peso and world stocks fell on Wednesday as Donald Trump swept to victory in the US presidential election, but fears of a Brexit-style shock that wiped trillions off global markets has failed to materialise so far.

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

Dublin’s Iseq bucked the trend, rising 1.1 per cent to o 6,154 in early trading. Shares in CRH, which generates 60 per cent of its profits in the US, were up over 6 per cent to €31.60 after Mr Trump’s win was confirmed.

The company is expected to be one of the main beneficiaries of a Trump presidency due to increased spending on infrastructure.

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

“I love this country,” Mr 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.”

Vows by Mr Trump that he would also forge strong relations with other big nations helped ease concerns of heavy tariffs being slapped on selling to the United States and starkly more aggressive geopolitical stance.

Safe-haven sovereign bonds, the Japanese yen and gold were all giving back ground fast having surged in Asian trading as the election results had come in and, as in the case of the Brexit vote in June, proved polls and betting

markets woefully wrong.

Overnight in Asia as markets had toppled, Sean Callow, 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 far more measured.

“The initial reaction in markets was violent,” said Saxo Bank head of FX strategy John Hardy. “But if you look at it across markets you are seeing a pretty decent reversal off the spike.” The mild 0.7 per cent dip in European stocks was nowhere near as bad as the 4 per cent plunge futures markets had indicated and the near 9 per cent slump they initially suffered after the UK Brexit vote.

Mexico’s peso also bounced, roughly 4 per cent, off a record low it had hit overnight - though it was still down an eye-watering 8.5 per cent as emerging

markets bore the brunt of the impact.

Mr Trump's threats to rip up a free trade agreement with Mexico and 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.

US stock futures were pointing to a drop of around 2 per cent for Wall Street later, less than half the 5 percent they had been suggesting in Asian trade. As FX

markets had reeled in Asia, 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 initial scare was clear in the Mexican peso, which plunged more than 13 per cent against the dollar at one point in the biggest daily move in two decades. “A lot of Trump’s negative geopolitical rhetoric was concentrated around Mexico and trade with Mexico and tearing up the Nafta agreement, so the peso just become this natural barometer of the election,” said Deutsche Bank EM FX Strategist Gautam Kalani. “What happens now though is all up in the air.” The risk of a global trade war likewise knocked other currencies across Asia, with the Australian dollar leading the rout. The story had been very different against the safe-haven yen, with the US dollar shedding as much as 3.3 per cent to 101.85 yen and around 2 per cent on the euro before the market changed direction.

Reuters