Stocks and Mexican Peso Fall

November 9, 2016

The U.S. election gave the Republican Party control of the White House, both bodies of congress, and the wherewithal to secure a conservative tilt to the Supreme Court for the foreseeable future.

Trump upset Clinton by capturing all the southern states except Virginia and most of the Midwest. He appealed especially to white men without a college education and drew more support from women and evangelicals than had been expected. Clinton won California, Oregon, Washington, New Mexico, Colorado and Nevada in the West, Illinois and Minnesota in the Midwest and the Northeast corridor.

Markets had not been positioned for this result. The Japanese Nikkei swooned 5.4%. Stocks also fell 3.6% in New Zealand, 3.0% in Taiwan, 2.4% in Hong Kong, 2.3% in South Korea and 1.0-1.2% in India, Indonesia and Singapore. The Shanghai Composite index only dropped 0.6%, however.

The S&P futures initially fell as much as 5% but now shows a decline of around 2%. Equities in Europe are down 2.3% in Spain, 2.2% in Italy, 1.1% in France, 1.0% in Germany, and 0.4% in the U.K..

Markets still seem to be counting upon a federal funds hike next month. The ten-year Treasury at one point last evening was down to 1.74% but roared back and is up 8 bps on balance at 1.93%. The ten-year gilt rose 3 bps, while its German counterpart is 2 bps lower. The 10-year Japanese JGB yield is flat.

Gold soared 2.4% to $1,305.1 per ounce.

Trump sounded presidential in his victory acceptance speech early this morning, but the nation is clearly very divided. His supporters are full of joy, but some of the nation is wary and fearful. Some quick conclusions are that the Affordable Health Care will be scrapped, Janet Yellen is likely a short-timer at the Fed, changes are coming to U.S. trade and immigration policies, and tax rates will be changed broadly. U.S. participation in NATO is likely to be contingent. U.S. relations toward Japan, Latin America, China, and Russia face modification, too.

In other news,

Japan’s seasonally adjusted current account surplus narrowed to JPY 1.477 trillion in September from August’s spike of JPY 1.976 trillion. The unadjusted current account surplus was JPY 1.821 trillion, 25.4% wider than a year earlier.

Japan recorded a JPY 162 billion customs trade surplus in October 1-20 versus a JPY 253 billion deficit a year earlier. Imports plunged 17.1%, eclipsing a 7.6% on-year slide in exports.

Bank lending in Japan rose 2.4% on year in October, compared to growth of 2.1% in both the second and third quarters.

Japan’s economy watchers index, a measure of activity observed by service sector workers, improved 1.6 points to a 9-month high of 46.2 in October.

Chinese CPI inflation rose further to a 6-month high of 2.1% in October from 1.9% in September and 1.3% in August. Producer prices, which started the year with a 5.3% on-year decline in January and had only edged above zero in September to 0.1%, accelerated to post a 12-month climb of 1.2% in October.

Britain’s goods and services trade deficit widened to a 3-month high of GBP 5.221 billion in September, bringing the third quarter total to 11.0 billion pounds. The merchandise trade deficit of GBP 12.698 billion also constitutes a 3-month high.

Central banks in Poland and Thailand retained their main interest rate levels after scheduled monetary policy reviews. The level in each case happens to be 1.5%.

According to measures compiled by the Bank of France, business sentiment in October was unchanged from September in manufacturing and the services sector but improved a bit in construction. Central bank officials project that French GDP is likely to rise 0.4% this quarter.

Greek industrial production growth from a year earlier remained at a mere 0.1% in September. Portugal’s jobless rate slipped  0.3 percentage points to 10.5% in 3Q.

Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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