Markets nervous as early US election results project Trump

Financial markets sold off as the first results of the US election were being called, with Asian stocks, US futures and the Mexican peso sliding as Donald Trump pulled ahead in the race for presidency and setting the stage for a late, tense night for investors.

US and European bourses had put in relatively confident performances on Tuesday, but the mood was starting to sour in Asia as markets awaited the outcome of the election with the Republican candidate pulling ahead of Democrat rival Hillary Clinton. After early gains, the Mexican peso swung sharply to be 5 per cent weaker and on track for its biggest one-day drop since 2009.

The S&P 500 index had closed 0.4 per cent higher at 2,139, clawing back the last of last week’s losses. US stock market futures were jumpy as the results for individual states came in, but were down by 1.6 per cent by 9.17pm in New York.

In Japan the broad Topix benchmark was down 1.5 per cent, while the Nikkei 225 dropped 1.6 per cent, as the yen began to strengthen. The Japanese currency’s haven status was coming to the fore as Mr Trump’s chances held firm, and the yen was 1.8 per cent stronger at ¥103.32 per dollar, having briefly traded above ¥105 earlier.

The Australian equity market swung to be 0.6 per cent weaker, while Hong Kong’s Hang Seng was down 1.6 per cent. China’s Shanghai Composite was off 0.4 per cent, relatively unmoved by data showing the pace of inflation on the mainland picked up in October.

The dollar index, a measure of the US currency against a basket of global peers, swung into negative territory and was down 0.5 per cent at 97.41. Analysts at 4Cast said the dollar was marching to the whim of the poll results.

“The real money is probably sat down with a glass of something to ease any nerves, but there is plenty of scope for the fast money to get into all kinds of trouble in what are still fairly narrow ranges in the big scheme of things,” analysts at the economic consultancy said.

The Associated Press called six states for Mr Trump including Tennessee, Indiana and South Carolina, and gave Mrs Clinton a string of early east coast states including New Jersey, Massachusetts and Maryland, as expected.

“If we get more comfortable that she will win Florida or Ohio or a big state that blocks his path to victory, global stock markets should continue to rally,” said Adam Schor, director of global equity strategy at Janus Capital Group. “You will see that through Asia and into the New York open. If we get a Clinton victory and Republican House and Senate, that is the optimal outcome for markets. It will be one more thing that favours risk assets.”

But there has been a persistent sense of wariness about the possibility of a UK-EU referendum-style shock in favour of Mr Trump, particularly given an elevated proportion of undecided voters. “Brexit showed that polls are imperfect, and we are in an era of populism which is playing havoc with normal assumptions,” said Matt Peron, head of equities at Northern Trust.

While the spotlights were on the presidential race, the outcome of the Congressional election was also key to the post-election market psychology.

“US equities have discounted a very clear outcome – a Clinton victory, Republicans holding the House and Republicans holding the Senate,” said Nicholas Colas, chief market strategist at Convergex. “You only have to run that checklist for equities to work from here. If the Republicans don’t hold the Senate, that will be the conversation tomorrow.”

Across the Atlantic, the Euro Stoxx 600 index had edged 0.3 per cent higher on Tuesday as it continued to rebound from a four-month low. The Xetra Dax index in Frankfurt added 0.2 per cent, while the FTSE 100 in London outperformed with a 0.5 per cent gain.