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Sunday, December 15th, 2019

U.S. stock futures plunge as Trump's prospects of winning rise

by November 9, 2016 General

U.S. stock futures prices drop sharply in overnight trading , while 10-year U.S. Treasury futures prices rise as more U.S. presidential election results were tallied on Tuesday night.Vote counting so far has Republican Donald Trump ahead of Democrat Hilary Clinton, winning some crucial states.STORY:Trump wins Ohio, battles Clinton for lead in close battleground racesState-by-state U.S. Electoral College resultsKey U.S. Senate races close, Republicans defend House majorityCOMMENTS:ALAN LANCZ, PRESIDENT, ALAN B. LANCZ & ASSOCIATES, TOLEDO, OHIO:(If Trump wins) “I think because of the uncertainty and the shock value of what happened, you could see a drop over the short term of a few weeks, and if the drop gets too severe there’s going to be a great buying opportunity. If you look at the long-term perspective, some of the platform he is most strict on implementing, like corporate tax cuts, will help earnings per share.”Lancz said the S&P 500 could fall 5 to 8 percent in the next few days if Trump wins. Sectors such as healthcare and financials, which have had a rocky performance this year, would be appealing if they get knocked down with the broader market, Lancz said.DONALD SELKIN, CHIEF MARKET STRATEGIST, NATIONAL SECURITIES, NEW YORK:(On the spike in VIX futures): “VIX futures are this point are assuming he’s going win. It was no surprise that if he wins this was going to happen. … With Brexit we had one bad day but this is different. This is what’s scary about putting the most powerful position in the world in the hands of a man who many believe is temperamentally unstable.“His tax cuts could open up a huge increase in the budget deficit and his trade sanctions could interrupt world trade. This could put us in a recession.”CRAIG HARLAM, SENIOR MARKET ANALYST, OANDO, LONDON:“For the second time this year it looks as though markets have got a little ahead of themselves when it comes to predicting the outcome of a major vote. Back in June the markets had all but priced in a UK vote to remain in the EU, this time it was a similarly favourable market outcome that traders were banking on – a Clinton victory – and it seems that once again, they may have got it wildly wrong.”BUCKY HELLWIG, SENIOR VICE PRESIDENT, BB&T WEALTH MANAGEMENT, BIRMINGHAM, ALABAMA:“If the selloff in stocks carries through tomorrow and a few days after (assuming a Trump win) it could provide a buying opportunity similar to post-Brexit market action.“A Trump win could put the FOMC on hold in December – beneficial for stocks and bonds.“The consensus of the investment community was that Clinton was going to win. Positions will have to be shifted if she does not win, and we are seeing the start of that with the futures selloff tonight.”MOHAMED EL-ERIAN, CHIEF ECONOMIC ADVISER, ALLIANZ:“This extremely close race is catching many traders by surprise. Hedging activity is concentrated in a few markets, as imperfect as this is. Having bounced back yesterday following the FBI news that favoured Clinton, markets are now repricing to a much tighter race. It is absolutely fascinating.”(On Trump winning Florida): “Yet another example of the politics of anger at play. If current market moves hold or go further, there is likely to be quite a bit of de-leveraging and forced selling tomorrow.”DAVID KOTOK, CHAIRMAN AND CHIEF INVESTMENT OFFICER, CUMBERLAND ADVISORS, FLORIDA:“The best thing to watch is when the U.S. markets are closed and you get a world view, in real time and reactive to each data point, and we are seeing it. You see it in the peso, in the stock futures, in gold, everywhere. We have a universal view that market agents view Donald Trump as unknown and unpredictable and threatening success if he ends up president. That says nothing about what his presidency will be, it’s the perception derived from the last year of a political campaign.”JACK ABLIN, CHIEF INVESTMENT OFFICER, BMO PRIVATE BANK, CHICAGO:“The futures move you’re seeing now not necessarily discounting a Trump victory. It’s unwinding the assumption of a Clinton lock.“The market’s going to respond to what the polls deliver. If Clinton ekes out a victory it could be different.“At the moment it appears that everyone’s expectations have been wrong, that she’s not going to walk away with it very easily. It’s still possible she’ll win. It’s just not the cakewalk investors had assumed.”DAVID JOY, CHIEF MARKET STRATEGIST, AMERIPRISE FINANCIAL, BOSTON:“If he wins, the cash market is going to follow through on what the futures are doing, so it is going to be an awfully volatile day tomorrow, obviously to the downside. Whether it is a buying opportunity, I think would take awhile to figure out. By that I mean if he wins and you realize he is not going to be inaugurated until late January, there is going to be a long period of uncertainty about what policy initiatives are likely to be enacted, what is going to be the response of the Fed, how are consumers going to respond, is business just going to put their hands in their pockets.“There is going to be a longer period of uncertainty than is typical even with a change in administration because it is such a change and there is just so many uncertainties. It may prove to be, ultimately, a buying opportunity if the downdraft is severe enough, but I don’t expect markets will bounce back quickly either, so you might have to wait awhile to be rewarded. Eventually markets, as they normally do historically, adjust, but this time it may take a little longer for that process to unfold.”OMER ESINER, CHIEF MARKET ANALYST, COMMONWEALTH FOREIGN EXCHANGE, WASHINGTON:“If you do see a Trump victory, then for FX markets the most likely reaction will probably be similar to what we saw last week, but most likely more extreme and that was broadly a sell-off in the U.S. dollar. Most acutely, though, a sell-off against the typical safe havens, like the Japanese yen and the Swiss franc. We probably see a sell-off in riskier assets, in particular emerging markets assets, particularly the Mexican peso. 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.“Long-term is a bit harder to say. There’s some argument to be made that if Trump wins and the Republicans retain control of the House and the Senate, that could be a dangerous situation for markets because a Trump victory would likely come with a much higher degree of policy uncertainty. However, some of the proposed policies, whether it’s increased fiscal spending, tax cuts, a potential holiday for capital repatriation into U.S., those things could potentially be positive for the dollar on a longer-term basis. It’s hard to say how much of the campaign promises turn into actual policies, but I would say it’s longer-term slightly less negative than any knee-jerk reaction.”NAEEM ASLAM, CHIEF MARKET ANALYST, THINKMARKETS, LONDON:GOLD“Gold price is highly volatile today, and we are seeing massive moves for the metal. Investors have started to hedge their position and trying to protect themselves. Once again, there was a massive disconnect between market expectations and the reality. No one wants to remember “Brexit” moment, but it is certainly swinging that way. If Donald Trump does win the election, we expect the gold price to be near the level of $1,350 or even higher.“The Fed was going to increase the interest rate in December under Clinton’s victory, but right now those odds have dropped massively and this is also supporting the price of gold.”PESO“The Mexican peso is having the worst day ever, as traders are selling this currency heavily. No love at all, the currency crossed the 20 mark for the first time today and this shows the level of uncertainty that we have in the market. Investors are extremely nervous.”FUTURES“Dow futures crossed over 600 points, what shall we say? We are calling it ‘Black Election.’ It started to look a lot more worse than Brexit night, and in fact this is the worst since the U.S. had its rating downgrade.”QI GAO, FX STRATEGIST, SCOTIABANK, SINGAPORE:“If Trump wins, the odds of a Fed rate hike will decline. In this case, demand for non-U.S. dollar safe-haven currencies such as the yen and Swiss franc will rise. The U.S. dollar will weaken further against other major currencies. I cannot say the Fed will not hike, but certainly the chance will drop markedly.“Among emerging Asian currencies, the Korean won is seen most vulnerable as Korea is an export-driven economy and there are domestic issues such as politics, restructuring and anti-corruption law.”SHEN WEIZHENG, FUND MANAGER, IVY CAPITAL, SHANGHAI:“It’s increasingly likely that Trump will win. It’s going to be like another Brexit.“Whoever wins, the impact on China would be limited, as U.S. presidential power would be limited by the U.S. legal system. However, there would be sentimental impact on financial markets.“After the dust settles down, the market will then have to worry about a possible U.S. rate hike. Generally speaking, the November strategy is ‘risk-off.'”BRAD MCMILLAN, CHIEF INVESTMENT OFFICER, COMMONWEALTH FINANCIAL, WALTHAM, MASSACHUSETTS:“The chance of a Republican sweep is now very real. It was considered low probability, but policy uncertainty now rises substantially. With a Republican House and Senate, Trump now has a great deal more policy freedom – and it remains to be seen what he might do with it. Markets have reacted in the past with a decline as Trump’s probability of victory rose, and that is very likely to happen tomorrow if he wins.”BENITO BERBER, ANALYST, NOMURA SECURITIES, NEW YORK:“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.“You have to go back to when the United States took half of Mexico’s territory” to find such a moment when U.S. politics had such a potential impact on Mexico.MARKET REACTION:STOCKS: U.S. stock index futures opened modestly higher but turned sharply lower as Trump showed early leads in swing states. The S&P 500 e-mini futures traded down 4.7 percent at 11:45 EST/04:45 GMTUS STOCKS – Futures down sharply as greater chance of Trump victory seen.BONDS: U.S. Treasury futures prices opened slightly lower, but turned sharply higher, up 0.97 percent.US TREASURIES – U.S. bonds rally as stock futures plungeFOREX: The dollar fell 3.35 percent against the yen, while the greenback climbed more than 10 percent against the Mexican peso.FOREX – Dollar turns tail as Trump pulls ahead in fiercely contested US electionSPOT GOLD: Spot gold prices rise 3.9 percent to $1,325.60 an ounce.Tuesday’s trading synopsis:Ahead of the U.S. election results, U.S. stocks finished Tuesday marginally higher. After starting the session at a slight loss, the Dow Jones industrial average <.DJI> ended up 0.4 percent at 18,332.43 points and the S&P 500 <.SPX> gained 0.38 percent to 2,139.53 points. The Nasdaq Composite <.IXIC> added 0.53 percent to 5,193.49 points.Benchmark 10-year U.S. Treasuries closed on Tuesday down 8/32 of a point in price, driving the yield, which moves in the opposite direction, up to 1.858 percent from Monday’s closing yield of 1.828 percent.The U.S. dollar traded higher in the late New York session on Tuesday, with gains against the safe-haven yen and Swiss franc. The Mexican peso and Canadian dollar rose against the greenback as investors bet ahead of election results that Clinton would win the election.U.S. gold futures <GCcv1> settled down 0.4 percent at $1,274.50 per ounce.(Reuters Global Economics and Markets Reporters; +1-646 223-6300; Editing by Daniel Bases and Jonathan Oatis)By Daniel Bases