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Published: Sat, November 12, 2016
Economy | By Melissa Porter

US Markets Expected to Open Lower After Trump Win


US stocks were lower after the open on Wednesday morning, but recovered after sharp slides in USA futures overnight following Donald Trump's surprise victory in the US presidential elections. But all three markets rebounded into slender gains after Trump's conciliatory victory speech and as Wall Street opened firmer before nervously flitting in and out of negative territory.

Canada's most closely watched stock index showed only a moderate loss in early trading.

On Wall Street, health care sector companies led the gainers, surging 2.9 percent.

On Wall Street, US S&P 500 Index rose 0.2 percent while the Dow Jones industrial average jumped 1.2 percent, smashing through its previous record high set in August by nearly 1 percent. Banks and other financial stocks tend to benefit from higher interest rates and less government regulation, two things investors anticipate could happen during a Trump presidency.

S&P 500 Index futures slid as much as 5 percent.

Pricing in a possible Trump victory, Dow futures were down 3.8 percent or 687 points at 17,593.00 and S&P futures had dropped 4.6 percent to 2,037.80. The S&P 500 index was 0.14 percent down.

A sell-off in bonds sent prices tumbling, driving the yield on the 10-year Treasury note up to 2.08 percent from 1.86 percent late Tuesday. Trump has been highly critical of USA trade deals and adamantly opposes the proposed 12-nation Trans-Pacific Partnership pact with Asian nations. Benchmark U.S. crude was down 18 cents at $44.80 a barrel in NY. Brent crude, used to price worldwide oils, edged up 1 cent to $46.37 a barrel in London.

Though there remains a great deal of uncertainty over the geopolitical, immigration and trade policies of Trump, investors appeared to be soothed by the victory speech he made where he praised his opponent Hillary Clinton and he urged all Americans to unite as one following a campaign season that was deeply divisive.

In Europe, Germany's DAX was down 0.7 per cent at 10,408 while the FTSE 100 index of leading British shares was 0.1 per cent lower at 6,838.

Election day saw tentative gains as investors waited anxiously on the result but as voting projections swung in Mr Trump's favour trading turned volatile. However, by the time Trump was confirmed the victor and made his speech, financial markets had steadied. The dollar also recouped some ground, while assets that many investors search out at times of uncertainty, such as gold, came off earlier highs.

The euro and Swiss franc rose at least 1.2 percent against the dollar, while gold jumped 3.3 percent, the most since Brexit.

However, one currency, the Mexican peso, remained heavily down, as it dropped 8.5% due to the thought of a wall being built along the border of the US and Mexico.

The Mexico peso, which has been hit by Trump's threat to scrap the country's key free trade agreement with the United States and build a massive wall along the border, sank to near its record low. The peso, which had been viewed as a proxy for Trump's chances of winning, plunged more than 11 per cent, while the USA dollar fell against the yen.

"If Trump is able to follow through with these suggestions, Mexican activity will suffer greatly", said Jane Foley, senior foreign exchange strategist at Rabobank International. In the coming weeks, investors will be looking to see if he further tempers some of the rhetoric that polarized American opinion and often spooked investors in financial markets.

Markets are also expecting the US Federal Reserve to go ahead with a rate hike in December, given signs of stability in the US share markets.

Another point of interest will centre on the U.S.'s trade relations with China.

Investors hope Trump plans for infrastructure spending, tax cuts and lighter regulation will benefit the US economy, the world's biggest.

Those concerns weighed heavily on Asian stocks. And it was happening around the world: Japan's Nikkei index closed down more than 5 percent.

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