US stock market chaos after Donald Trump’s election fails to materialise as investors stay optimistic about economy
The Republican has won. And the world economy is recovering after the initial shock
PREDICTIONS of a massive stock market crash in the wake of Donald Trump's victory have failed to materialise as investors remain optimistic.
The UK and European stocks have rallied after an early wobble and the signs are the USA will also be fine as US bond yields have risen strongly in the wake of the Republican's victory.
The increase in US bond yields is a sign that investors think the outlook for the American economy remains positive.
U.S. bond yields have risen strongly in the wake of Trump's victory, a sign that investors think the outlook for the U.S. economy remains positive.
The yield, or interest rate, on the USA's 10-year bonds is up 0.08 percentage point at 1.948%.
That has helped the dollar recover its poise following earlier losses when Trump's victory became increasingly likely.
The euro, for example, is now basically flat on the day at $1.1025.
And is reporting that the Dow Jones, which has just opened in New York City, has opened higher.
Kathleen Brooks, a research director at City Index in London, thinks the rise in the yield may represent some optimism over the USA's economic outlook given Republican control of both the White House and Congress.
She said that the clarity in the American government could help the economy grow.
But she warns there could be problems ahead if yields continue to rise over the coming days and weeks.
If they do, she says "concern may grow that bonds are selling off due to fears of America's creditworthiness under a President Trump."
European stocks had an early wobble on the back of the news Donald has marched into the White House but have rallied since then.
Britain's FTSE 100 index was down more than 2% after the firebrand Republican sparked investor fears over the world economy by beating market favourite Hillary Clinton.
There were similar drops as Frankfurt's DAX 30 dived 2.9% to 10,181.89 points and the Paris CAC 40 index slid 2.8% to 4,350.07 compared with Tuesday's close.
But after Mr Trump’s soothing victory speech the stock markets clawed back some of their early losses.
The Centre for Economics and Business Research said global growth is likely to be 0.5% slower per year “in response to creeping protectionism and reduced migration” after his election.
Meanwhile, returns on German government bonds - seen as a safe haven during market turbulence - fell sharply as investors rushed to purchase the assets.
Carsten Brzeski, chief economist at ING Germany, said markets faced "chaos and turmoil" in coming days because of uncertainty about what economic program Mr Trump would follow.
Germany, for instance, depends heavily on global trade, while the real estate mogul has spoken out against trade treaties.
Mr Brzeski said global market turmoil could be worse than what followed Brexit due to the bigger role the US plays in the global economy.
But the losses on the German market, the DAX, is now only 1.5% lower at 10,330.
Investments traditionally viewed as safe havens such as gold are getting a lift.
The value of the precious metal is up 1.8% per an ounce, while the Swiss franc has risen against the dollar, and the Japanese yen has also been heavily in demand.
"Markets are reacting as though the four horsemen of the apocalypse just rode out of Trump Tower," said Sean Callow, a senior foreign exchange analyst.
The news sent also the Dow Jones futures in America and the Asian markets tumbling, reflecting investor alarm over what a Trump presidency might mean for the economy and global trade.
Oil prices also fell sharply, while the Euro and Sterling rallied against the dollar.
The Mexican Peso has collapsed against the pound as people around the world digest the realisation Trump is to become the 45th President of the United States.
Trump has threatened to rip up major trade agreements and impose barriers in the United States on imports from countries such as Mexico and China, which could reduce trade flows, harm already sluggish global growth and inflame tension.
"This is deja vu of the Brexit moment, very worrying," said Bob Takai, president at Sumitomo Corp Global Research in Tokyo.
"He hasn't really articulated a clear plan and he is a volatile messenger," said Michael Purves, chief global strategist at Weeden & Co.
Brian Jacobsen, chief portfolio strategist of American firm Wells Fargo Funds Management, said: "It's kind of a shock-and-awe type response, both because it creates all sorts of unknowns as to not only what sorts of policies will be implemented, but what timetable they will be implemented.
"A lot of people are fearful about what it could mean not only for U.S. growth but global growth if Trump makes good on his promise to impose tariffs on Mexican goods and Chinese goods, triggering a trade war.
"This isn't going to be just a drop-down and bounce-back sort of scenario. Because of these unknowns, this risk off mood could persist well into 2017."
Concerns of a Trump victory had weighed heavily on the Mexican peso since he had threatened to rip up a free trade deal with Mexico and tax money sent home by migrants in order to build a wall on the southern US border.
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"This is truly a historic moment. I don't recall such an extreme outlook on the US economy that could be so negative to the Mexican economy," said Benito Berber, an analyst at Nomura in New York.
"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, he added.
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