Wednesday, November 9, 2016

Investors See No Let Up In Market Bloodbath If Trump Wins Presidency

By Nichola Saminather
Reuters
November 9, 2016

Investors should brace for a further slump in global stock markets, the U.S. dollar and most commodities if Republican candidate Donald Trump becomes the next U.S. president, as appeared increasingly likely on Wednesday.

Markets fear a Trump victory could trigger global economic and political mayhem, creating massive uncertainty for investors who had been counting on a win by Democrat Hillary Clinton, whose policies were seen as more staid but predictable.

“If current market moves hold or go further, there is likely to be quite a bit of de-leveraging and forced selling tomorrow,” Mohamed El-Erian, chief economic adviser at Allianz, said as global markets skidded.

Trump has threatened to rip up major trade agreements and impose barriers in the United States on imports from countries such as Mexico and China, which could reduce trade flows and harm already sluggish global growth.

Jack Ablin, chief investment officer at BMO Private Bank in Chicago, forecast U.S. stocks could drop as much as 10 percent over the next 10 sessions if Trump is elected to the most powerful office in the world.

"Investors don't know what he (Trump) is going to do; the policies he's laid out have been vague and his demeanor is capricious.

"Foreign markets, particularly emerging markets, would take most of the brunt. These are markets that rely more on selling to us than us selling to them."

Market turmoil could also prevent the U.S. Federal Reserve from raising interest rates as expected in December.

As the chance of a Trump upset grew, global markets plunged, with some losses eclipsing the carnage seen after Britain's shock vote to leave the European Union in late June.

"Whatever the outcome, this is a horribly angry electorate," said Daniel Alpert, managing partner at Westwood Capital LLC in New York.

"The markets will tank and then, those around Trump who have reasonable minds will script him with some pablum for the markets and calm them.

"But that is not the issue. The issue is that he cannot fulfill the goals of those who are in his crazy inner circle and, at the same time, truly address the interests of those who have risen up against the Washington consensus."

Trump was leading Democrat Hillary Clinton in the Electoral College by a tally of 244-209 as of 0440 GMT, with some key swing states still too close to call. A tally of 270 is needed to win.

The dollar, the Mexican peso and crude oil all plunged as Trump gained ground, with U.S. stock futures ESc1 tumbling nearly 5 percent, likely wiping trillions of dollars of value off global financial markets, while traditional safe havens such as sovereign bonds, the Japanese yen and gold all rallied.

Emerging markets such as Mexico and companies related to them such as large U.S. stocks with global exposure are likely to bear the brunt of panic selling, investors forecast.

The MSCI Emerging Markets index plummeted 3.1 percent, its biggest one-day drop since the June 24 Brexit shock.

The Mexican peso is seen the bellwether for Trump's chances of a victory as his policies are damaging to Mexico's export-heavy economy. It plunged more than 13 percent to a record low as early projections put the maverick candidate with no political experience ahead.

"We'd probably see a selloff in riskier assets, in particular emerging markets assets, particularly the Mexican peso," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington, D.C.

"We're seeing that play out right now and I suspect if you see a Trump win we'd be seeing a continuation of something like that."


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Oil Prices Tumble As Trump Pulls Ahead In Close U.S. Election

By Henning Gloystein
Reuters
November 9, 2016

Oil prices tumbled on Wednesday as vote counting showed Republican Donald Trump edging ahead in an unexpectedly tight U.S. presidential election, setting world markets on edge.

Crude futures markets roared into action as Trump surprised by defeating Democrat Hillary Clinton in a series of key contests and opening a path to the White House.

U.S. West Texas Intermediate (WTI) CLc1 crude futures fell to a session low of $43.07 per barrel, down more than 4 percent from their last close and their lowest since September, before inching back to $43.26 a barrel at 0455 GMT.

International Brent crude futures LCOc1 were down 3.3 percent at $44.51 a barrel.

"This is dejavu of the Brexit moment, very worrying," said Bob Takai, president at Sumitomo Corp Global Research in Tokyo, referring to Britain's surprise vote to leave the European Union in a referendum last June, which led to market turmoil.

The falls in oil came as prices for gold, a traditional safehaven for investors in times of high economic risk jumped, while the dollar fell sharply against a basket of other leading currencies .DXY.

"Investors moved into complete 'risk off' mode... Trump winning would have negative consequences on the price of oil," said Jameel Ahmad, vice president of market research at trading platform and research firm FXTM.

"The threat of growth forecasts being downgraded at least over the short-term due to investor uncertainty in theory weakens demand for commodities like oil."

Trump won the key battleground state of Ohio, Florida, North Carolina, and likely Georgia, and led Clinton in a series of other states that were too close to call.

Elsewhere, a report by the American Petroleum Institute (API) showed crude inventory figures rising by 4.4 million barrel was also weighing on markets.


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Canada Immigration Website Appears To Crash As Trump Lead Grows

By Jeffrey Hodgson
Reuters
November 9, 2016

Maybe some Americans were serious when they threatened they would move to Canada if Republican presidential candidate became successful in his often polarizing campaign for the White House.

Canada's main immigration website appeared to suffer repeated outages on Tuesday night as Trump took the lead in several major states and his prospects for winning the U.S. presidency turned markedly higher.

Some users in the United States, Canada and Asia saw an internal serve error message when trying to access the www.cic.gc.ca/ website.

Officials for the ministry could not immediately be reached for comment, but the website's problems were noted by many on Twitter.

After some Americans, often jokingly, said would move to Canada if Trump was elected, the idea has been taken up by some Canadian communities. In February, the island of Cape Breton on Canada's Atlantic coast marketed itself as a tranquil refuge for Americans seeking to escape should Trump capture the White House.


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Mexico Peso Plunges To Life Low As Trump Homes In On U.S. Presidency

Reuters
November 9, 2016

Mexico's peso plunged to its lowest-ever levels on Tuesday night as U.S. Republican Donald Trump led in the key battleground state of Florida and had an edge in a clutch of other states, driving investors to contemplate that Trump could likely be the next U.S. president.

Concerns of a Trump victory weighed heavily on the peso for months on his 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 U.S. border.

The peso MXN=D2 weakened by more than 13 percent in Tuesday after-market trading for Mexico and in Wednesday trading in Asia, breaking past 20 pesos per dollar - its biggest intraday fall in at least 19 years.

"There's a lot of panic in the market, it is definitely an outcome it was not expecting," said Juan Carlos Alderete, a strategist at Banorte-IXE. "The movements are very strong, the market is showing higher risk aversion in search of safe-haven assets."

A Trump-inspired peso tumble could push Mexico's central bank to raise interest rates or directly intervene in forex markets to stem the bleed.

Three economists told Reuters they expected Mexico's central bank to raise its benchmark interest rate by an impromptu 75 to 150 basis points on Wednesday if Trump wins, while one of them said the bank could instead opt for a swap with the U.S. Federal Reserve pending how the peso evolves.

The central bank has already hiked its rate three times this year, lifting it to 4.75 percent to anchor inflation expectations following a sharp depreciation of the peso.

"I don’t think a Trump scenario was taken seriously in the last days by the market. Hopefully there are some contingency plans by authorities and they can take measures to protect the Mexican economy," said Ernesto Revilla, an economist at Banamex and the government's former chief economist.

Mexican central bank head Agustin Carstens last week said the country was ready in case of an "adverse" result in the U.S. election, which he has said could hit Mexico like a "hurricane."

Earlier on Tuesday, the Mexican currency had rallied nearly 1.4 percent before official election results began to be released, as final polls showed a Clinton advantage.

Measures of peso volatility, or bets on potential swings in the currency, spiked to their highest levels since the financial crisis, while the volume of wagers in peso futures contracts surged to a record high during the last 50 days.

"This is truly a historic moment. I don't recall such an extreme outlook on the U.S. economy that could be so negative to the Mexican economy," said Benito Berber, an analyst at Nomura in New York.

Berber said a Trump win could drive the peso to between 23 and 26 per dollar.

Implied volatility in one-week peso-dollar options contracts surged to the highest level since the financial crisis ahead of the election, although levels dipped this week.

Daily volume in the front-month future peso contract MPv1 has averaged more than 61,000 contracts over the last 50 days, nearly three times the historic mean of around 23,000.

Major banks told clients to expect volatile currency markets in the aftermath of the U.S. election. One Goldman Sachs client said the bank advised on Monday it would not accept new stop-loss orders on the peso until further notice.

A deep slump in the peso could stoke inflation, but it would also help compensate exporters, who could face new tariffs under a Trump presidency.



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Trump's Surprise Wins In Key States Rattle World Markets

By Steve Holland and Emily Stephenson
Reuters
November 9, 2016

Republican Donald Trump scored a series of shocking wins in battleground U.S. states including Florida and Ohio on Tuesday, opening a path to the White House for the political outsider and rattling world markets that had counted on a win by Democrat Hillary Clinton.

With investors worried a Trump victory could cause economic and global uncertainty, the U.S. dollar sank and stock markets plummeted in wild Asian trading. Opinion polls before Election Day had given Clinton a slim lead.

Mexico's peso plunged to its lowest-ever levels as Trump's chances of winning the presidency increased. Concerns of a Trump victory have weighed heavily on the peso for months because of his threats to rip up a free trade agreement with Mexico and tax money sent home by migrants to pay to build a wall on the southern U.S. border.

Trump surged to wins in Florida, Ohio, Iowa and North Carolina, and Fox News projected a win for him in Wisconsin. With voting completed in 49 of the 50 U.S. states, he also narrowly led in Michigan and New Hampshire, edging him closer to 270 Electoral College votes needed to win the state-by-state fight for the White House.

Shortly after Fox called Wisconsin for Trump, supporters at his election evening rally in New York began to chant "lock her up" - a common refrain on the campaign trail for the former U.S. secretary of state repeatedly dubbed "Crooked Hillary" by Trump.

A packed crowd in the lobby of Trump's new hotel in Washington D.C. chanted "lock her up, lock her up," and "USA, USA, USA" as state after state was called for Trump.

Clinton still had ways to reach 270 electoral votes, but she would have to sweep the remaining battleground states including Pennsylvania, Michigan and Nevada, and pull off an upset win in Arizona.

Trump captured conservative states in the South and Midwest, while Clinton swept several states on the East Coast and Illinois in the Midwest.

After running close throughout the night in Virginia, Clinton pulled out the swing state that is home to her running mate, Senator Tim Kaine.

At 8:55 p.m. EST, Clinton acknowledged a battle that was unexpectedly tight given her edge in opinion polls going into Election Day.

She tweeted: "This team has so much to be proud of. Whatever happens tonight, thank you for everything."

As of 11:40 p.m. EST, Trump had 244 electoral votes to Clinton’s 209, with U.S. television networks projecting the winner in 41 of the 50 states and the District of Columbia.

A wealthy real-estate developer and former reality TV host, Trump rode a wave of anger toward Washington insiders to challenge Clinton, whose gold-plated establishment resume includes stints as a first lady, U.S. senator and secretary of state.

Unpopular Candidates

Both candidates had historically low popularity ratings, although Trump's were worse than Clinton's, in an election that many voters characterized as a choice between two unpleasant alternatives.

Before Tuesday's voting, Clinton led Trump, 44 percent to 39 percent in the last Reuters/Ipsos national tracking poll. A Reuters/Ipsos States of the Nation poll gave her a 90 percent chance of defeating Trump and becoming the first woman elected U.S. president.

Also at stake on Tuesday was control of the U.S. Congress.

Republicans will maintain their six-year control over the House of Representatives, major TV networks projected, and were on track to defend their Senate majority, as well, against a handful of failed Democratic challengers.

In a presidential campaign that focused more on the character of the candidates than on policy, Clinton, 69, and Trump, 70, accused each other of being fundamentally unfit to lead the country.

Trump entered the race 17 months ago and survived a series of seemingly crippling blows, many of them self-inflicted, including the emergence in October of a 2005 video in which he boasted about making unwanted sexual advances on women. He apologized but within days, several women emerged to say he had groped them, allegations he denied.

He was judged the loser of all three presidential debates with Clinton and she led him by varying margins for months in opinion polls.

Trump won avid support among a core base of white non-college educated workers with his promise to be the "greatest jobs president that God ever created." He has vowed to impose a 35 percent tariff on goods exported to the United States by U.S. companies that went abroad.

His volatile nature and unorthodox proposals led to campaign feuds with a long list of people, including Muslims, the disabled, Republican U.S. Senator John McCain, Fox News anchor Megyn Kelly, the family of a slain Muslim-American soldier, a Miss Universe winner and a federal judge of Mexican heritage.


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