Turbulence in financial markets calmed after a knee-jerk selloff in stocks and rally in haven assets as investors reassessed the effects of Donald Trump’s surprise victory in the U.S. presidential election.
After initially sliding the most since the aftermath of Britain’s shock vote to leave the European Union, European equities pared their losses with futures on the S&P 500 Index. The yen, gold and government bonds scaled back gains. The spread between five- and 30-year Treasury yields widened amid speculation Trump as president would increase spending to spur economic growth. Mexico’s peso led emerging-market currencies lower amid concern U.S. trade policies will become more protectionist.
“The reactions are not as bad as I would’ve expected but it is still early days,” said Martin van Vliet, an interest-rate strategist at ING Groep NV in Amsterdam. “It’s certainly not as dreadful as many people had expected a few hours ago. Everyone is now wondering about the longer-term ramifications.”
Trump was pushed over the 270 Electoral College votes needed to become the president-elect and the Republicans also retained control of Congress. A Trump victory had been portrayed by analysts as having the potential to unhinge markets that were banking on a continuation of policies, coinciding with the second-longest bull market in S&P 500 history. Brexit was the last major political shock and led to the U.S. equity gauge sliding 5.3 percent in two days.
Most polls showed Democratic candidate Clinton ahead of Trump going into the vote and websites that took bets on the victor had put her odds of winning at 80 percent or more. Trump has pledged to clamp down on immigration to the U.S. and renegotiate free-trade agreements with countries including Mexico.
“It’s time for America to bind the wounds of division,” Trump said as he addressed cheering supporters in Manhattan. “I pledge to every citizen of our land that I will be president for all Americans.”
S&P 500 futures tumbled by the maximum 5 percent loss permitted on the Chicago Mercantile Exchange before trading curbs are triggered, then pared their decline to 2 percent as of 8:46 a.m. in London. The restrictions last came into force in the wake of the Brexit vote and set a floor price for the contracts through the remainder of the overnight trading session.
The Stoxx Europe 600 Index fell 1.3 percent after sliding as much as 2.4 percent. Equity indexes in Germany and France fell at least 1.5 percent. Benchmarks in India, Japan and New Zealand posted the biggest declines in the Asian region.