Stock markets recover

World stock markets reacted with a sharp initial downturn to maverick Republican Donald Trump's shock election win on Wednesday, but quickly recovered their poise with surprising resilience. Asia kicked off a "Trump slump", with Tokyo diving on concerns over the untested policies of the billionaire businessman and reality TV star.
Europe followed suit, tipping about two percent lower at the open in Frankfurt, London and Paris. But all three markets rebounded into slender gains after Trump's conciliatory victory speech and as Wall Street opened firmer before nervously flitting in and out of negative territory. "Donald Trump's victory in the US presidential election has, so far, had less impact on financial markets than most anticipated," said Andrew Kenningham, Senior Global Economist at Capital Economics.
"We suspect that it has also made little difference to the immediate outlook for the global economy," he said, adding however that there were "bigger question marks" over longer-term prospects. "After that initial plunge, European markets have seen a remarkable recovery this post-election Wednesday," said Spreadex analyst Connor Campbell.
"A surprisingly presidential Trump victory speech seems to have reassured investors, the talk of infrastructure spending and a lack of usual vulgarity allowing for a relative aura of calm." "As people have come to make considered assessments, the reaction seems more rational," added David Jane at Miton's.
Summarizing the impact of Trump's expected economic policies, Jane concluded that they will be "broadly inflationary". This means, he said, that they will be "supportive of equity markets and negative for bonds".
The extraordinary US election outcome has drawn direct comparisons with Britain's shock Brexit vote in June to leave the European Union. "Of course, just as Britain has not yet Brexited, America has not officially entered the era of Trump," said Campbell.
"That does, however, leave plenty of room for volatility as 2016 begins to wrap up, let alone the months and years of an actual Trump presidency." Investors fled to safe-haven assets, including gold and German government bonds. Rebecca O'Keeffe, head of investment at stockbroker Interactive Investor, noted there were "significant" worries over Trump's policies. "Trump is a huge leap into the unknown," she told AFP.
"Trump is likely to cut taxes, invest in US infrastructure, be very pro-growth at home but be highly protectionist when it comes to the rest of the world." The incoming president insists he could bring jobs back to America by renegotiating international trade deals, while he has repeatedly vowed to ruthlessly pursue growth of the world's biggest economy.
Pharmaceutical stocks rebounded as Clinton's campaign for cheaper drugs was off the table after her defeat, with Sanofi, Bayer and AstraZeneca all sharply higher. Defence stocks also rose on expectations of higher US military spending, with Thales shares hitting an all-time high in Paris and BAE Systems rising in London. ArcelorMittal surged in Paris on expectations of higher infrastructure spending by a Trump administration.
Auto shares, meanwhile, dropped on fears of protectionist measures imposed by Trump, which sent BMW, Peugeot and Mercedes shares tumbling. Financials were mixed, but Spain's second-biggest bank, BBVA, fell more than eight percent, punished by investors for its high exposure to the Mexican market.
The Mexican peso - which has been battered by Trump's anti-Mexican promises that included the construction of a border wall - hit a record low against the dollar as the greenback soared to 20.7818 pesos. The Mexican stock market fell over three percent at the opening. The dollar recovered from early losses, and even showed gains against the euro in the European afternoon.