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 maximum allowed, futures on the S&P 500 Index pared losses along with European equities, while the yen and gold scaled back gains. Longer-maturity Treasuries sold off and copper soared to a 15-month high on speculation Trump will increase spending to spur economic growth. Swaps traders cut wagers on a Federal Reserve interest-rate hike next month. Mexico’s peso led emerging-market currencies lower amid concern U.S. trade policies will become more protectionist.
“It’s an amazingly impressive recovery off the lows for risk assets,” said Craig Collins, managing director of rates trading at Bank of Montreal in London. “It’s very surprising given the feel the session had to start with, that it was a massive risk-off flight to quality bid. Now the early losses are getting erased and it looks like it could go unchanged on the day by the time the U.S. gets in.”
A Trump victory had been portrayed by analysts as having the potential to unhinge markets banking on a continuation of policies that coincided with the second-longest bull market in S&P 500 history. Going into the vote, most polls showed Democratic candidate Hillary Clinton ahead 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. In his victory speech, he pledged to focus on rebuilding U.S. infrastructure.
“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 2.2 percent as of 6:11 a.m. in New York. 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 0.8 percent after sliding as much as 2.4 percent. Equity indexes in Germany and France fell at least 0.7 percent. Losses were tempered by a rally in health-care stocks, which have suffered amid speculation Clinton would push for drug-price controls as president. Novo Nordisk A/S, Roche Holding AG and Shire Plc jumped at least 6.5 percent.
The MSCI Emerging Markets Index dropped 2 percent, the most in almost two months, amid concern over Trump’s protectionist policies. Hong Kong, South Korea and Taiwan suffered the biggest losses.
Russia bucked the trend on speculation Trump will improve ties with Moscow, leading to an end to sanctions that have stalled an economic recovery. The Micex Index climbed 1.4 percent.