US stocks gain following Trump victory; bond prices tumble

European markets are popping higher on Thursday morning, seemingly shrugging off any anxiety over Donald Trump’s shock election victory on Wednesday.

As investors try to piece together what a Trump presidency will mean for stocks, a growing consensus is that emerging markets will be some of the biggest losers, at least in the short term. Stocks recovered throughout the day and ended positively.

Investors are keeping a close eye on the US presidential election Tuesday, a day after the market had its biggest gain since March. The exception was the Mexican peso, which swooned 10.7 percent to 20.31 pesos to the dollar.

“Certainly it (the trading floor) has a much different tone than what it did just several hours ago, but for now things remain very orderly and we would anticipate that tone to continue or improve as we get closer to the open”, said Ryan Larson, head of equity trading, U.S.at RBC Global Asset Management in Chicago, Illinois. “It is clear that this next president will have a profound effect on global markets”.

The pair based their estimates on market movements during major campaign developments – the first presidential debate, the Access Hollywood tape of Trump, and FBI James Comey’s first letter to Congress regarding Clinton’s emails.

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.

After scoring gains earlier – when it seemed like Democrat candidate Hillary Clinton would thump her Republican foe – Japan’s Nikkei 225 index dropped a whopping 6.1 per cent, while market benchmarks in Australia, South Korea’s and Hong Kong tumbled similar amounts. The yields rose as high as 2.148 percent, the highest since January.

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 USA and Mexico. Investors chose to focus on his campaign promises aimed at boosting US economic growth through higher infrastructure spending and cutting red tape, rather than uncertainties such as what he might do with trade agreements. “Any shocks or turbulence in the markets brought about by the election results will be short-lived and economic fundamentals will play a vital role in the performance of the financial markets”. Trump’s victory has also clouded the outlook for American monetary policy, amid speculation he could ramp up fiscal stimulus, while also potentially pursuing a more pro-business agenda. By late Wednesday Tokyo time, the dollar was at 103.36 yen, down 1.5 percent from 105.46 earlier in the day.

The mild 0.7 percent dip in European stocks was nowhere near as bad as the 4 percent plunge futures markets had indicated and the near 9 percent slump they initially suffered after the U.K. Brexit vote.

In Europe, Germany’s DAX rose 1.6 percent, while France’s CAC-40 gained 1.5 percent.

Pricing in a possible Trump victory and presaging a gloomy Wednesday on Wall Street, Dow futures were down 3.2 percent or 489 points at 17,803.00. Benchmark U.S. crude was down 18 cents at $44.80 a barrel in NY.

The Japanese yen, considered a safe haven currency rose as much as 4 percent is Asia. Gold also saw large moves, at one stage gaining more than $60 an ounce to $1,337 before falling back to trade 2 percent higher at $1,302 by 5:37 a.m. ET.

In oil markets, Brent crude prices see-sawed throughout the session, before dropping 0.6% to 45.76 USA dollars a barrel.