It wasn’t supposed to be this way – according to pollsters and many media pundits. Just before 22:00 EST (3:00 BST) markets have been thrown into a state of chaos as early exit polling has shown Donald Trump performing strongly across key battleground states. This result, if it holds, could trigger a rapid influx of volatility, as this result was neither priced in nor expected across key markets.
At the time of writing, several key states in Hillary Clinton’s ‘blue wall’ are still holding, however Mr. Trump’s outperformance in Florida, Ohio, and North Carolina, all battleground states, has triggered anxiety in markets. While the London open is still hours away, several key indices and futures have already started to move.
On the equities front, the S&P futures fell over -3.0% overnight, falling below an earlier low of 2085 all the way down to 2068. By extension, the DOW was down over 500 points, which if it held would constitute its largest daily loss of 2016. The US market had rallied so far this week, jumping over 2.0% during the first couple days of the week as pollsters increasingly portended a Clinton victory.
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Looking to commodities, gold bulls received a welcome treat, as the yellow metal exploded above the $1300 handle, en route to a weekly high of $1306 at the time of writing (2.45%). Alternatively, silver is also higher as well, albeit by a margin of 1.25% to $18.56. Should Mr. Trump hold onto this lead, these margins are expected to grow.
On the foreign exchange (FX) front, the USD is being hammered against several notable majors – the EUR/USD has jumped over 1.26% to 1.115, while the USD/JPY plunged over -2.38% to 102.515. While volatility has spiked overnight, retail forex brokers have continued to handle order flows normally, many of which employing previous margin changes ahead of the election.
According to Neil Wilson, an ETX Capital Market Analyst, “Chaos – we’ve just seen a massive risk-off move across the markets as Trump heads to victory Florida. There was a major sell-off in stocks while havens like the yen and gold are soaring as the Sunshine States gives Trump a very good chance at the White House. Dow futures are down more than 450 points and USDJPY is trading at just above 102.”
“This is huge – there is now a very real prospect that Trump will win and so markets are repricing everything. Our election index is now just giving Trump the nod over Clinton – an incredible turnaround,” he warned.