Trump triumph sparks global selloff

10 November, 2016

Risk aversion swept across the financial markets during early trading on Wednesday after the unexpected Trump presidential victory soured investor risk appetite. Global sentiment was dealt a frightening blow with most major stocks sold off savagely as uncertainty repelled investors from riskier assets. The polls pointing to a Clinton victory were completely wrong, consequently catching participants off guard and this may come at a heavy price moving forward. With risk-off sentiment amid the Trump victory becoming a dominant theme across the board, stock markets could be left depressed for prolonged periods.

The S&P 500 futures have already slumped by as much as 5% following Trump's victory with the bearish contagion dragging European stocks 2% lower on Wednesday. Wall Street may be contaminated by the negativity with further declines expected in the coming days as the toxic combination of uncertainty and sliding oil prices provide a foundation for bears to install repeated rounds of selling. There is a strong possibility that today’s presidential results spark a fresh era of risk aversion with investors turning to safe-haven assets for protection against the pending chaos.

What a Trump victory means…

Uncertainty and Donald Trump seem to have a symbiotic relationship and this continues to weigh heavily on global sentiment. Concerns remain elevated over Trump potentially triggering a global and political disruption in a fragile financial landscape that is already entangled in a losing battle with investor anxiety. The persistent threats from Trump to discard major trade agreements have kept participants on edge, while his anti-Mexico rhetoric continues to pressure both the Peso and Mexican economy. Emerging markets may be in store for a nasty surprise moving forward as risk-off encourages another brutal selloff. Many questions remain unanswered in this sensitive period of uncertainty with more explosive movements expected as markets attempt to digest the Trump reality.

Dollar bears rampage

The Dollar experienced heavy losses during early trading on Wednesday with the Dollar Index sinking to the lows of 95.91 following the unexpected Trump presidential victory. Dollar weakness may be a recurrent theme moving forward as the awful combination of uncertainty and heightened concerns over the future of the US economy entices sellers to attack incessantly. In the aftermath of Trump’s victory, expectations have already diminished over the Federal Reserve raising US interest rates in December with the current odds below 50% which should pressure prices further. Despite the sharp rebound, which has taken the Dollar Index back towards 97.65 as of writing, bears remain in control with the Index sinking towards 96.00 as speculators reduce bets on a US rate hike.

Sterling scheduled for further declines

Sterling bulls received false encouragement on Wednesday with the GBPUSD lurching towards 1.2545 on the back of Dollar weakness. This technical correction simply provided a fresh opportunity for bears to install repeated rounds of selling on a currency that is heavily poisoned by hard Brexit fears. Previous talks of the high court announcing that the Brexit cannot proceed without the vote to Parliament did little to keep Sterling buoyed with further losses expected as investors come to term with the Brexit reality. The GBPUSD could be poised for steeper declines once bears conquer the 1.2350 support. From a technical standpoint, a breakdown below 1.2350 could open a path towards 1.2200.

WTI pressured by risk-off

WTI Oil fell below $44 on Wednesday as Donald Trump’s unexpected victory in the U.S presidential election sparked a wave of risk aversion. Oil prices were already pressured by the fading expectations towards OPEC securing a freeze deal in November’s meeting with this period of risk-off ensuring the commodity remains depressed. The amalgamation of oversupply woes and mounting concerns over demand diminishing amid slowing global growth could guide WTI crude back below $43. Some attention may be directed towards the pending crude oil inventories report which could send oil lower if there is a buildup in inventories.

Commodity spotlight – Gold

Gold surged with ferocity on Wednesday as Trump’s victory triggered risk aversion which encouraged investors to frantically pile into safe-haven assets. Markets have been flooded with renewed uncertainty consequently bolstering Gold’s allure. Dollar’s weakness amid dimming US rate hike expectations always played a key part which saw Gold prices clipping the highs of $1337. Buyers could be back in town with further gains expected as the mixture of Dollar weakness and uncertainty attracts investors to safe haven assets. From a technical standpoint, Gold is bullish on the daily timeframe as there have been consistently higher highs and higher lows. A breakout and decisive close above $1308 could encourage a further incline towards $1320. 

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