Global market volatility slows down post US election

The pan-European Stoxx 600 equity index is down barely 0.2 per cent and S&P 500 futures are nudging slightly lower as the global stock market rally that followed the election of Donald Trump as US president shows signs of slowing reports the Financial Times.

The US dollar is steady, and this is helping underpin many commodity prices, with copper at one point rising more than 6 per cent to briefly breach $6,000 a tonne.

The red metal has jumped to its most expensive since July 2015, its 19 per cent surge over just five sessions capturing the essence of a remarkable week for markets following Mr Trump’s shock triumph.

It had been feared that risk appetite would crumble should the Republican candidate capture the White House. But after a brief sell-off, sentiment swiftly improved with industrial commodities like copper leading the way on hopes Mr Trump’s proposed burst of infrastructure spending would boost demand and help deliver faster economic growth.

This reignited the bullish mood on Wall Street, with investors in pharmaceuticals groups and financial stocks also welcoming the prospect of a lighter regulatory touch than might have been the case if Democratic candidate Hillary Clinton had won.

US futures, which in early electronic trading on Wednesday were implying the S&P 500 might fall to nearly 2,030, on Friday are suggesting the index will fall 6 points to 2,161.5, leaving the Wall Street stock barometer — which tends to set the global equity market tone — less than 29 points shy of a record high.

The Dow Jones Industrial Average did manage to close on Thursday at a record 18,808, as heavyweights like Goldman Sachs saw strong gains. Trading may be subdued later in the US as there is a bank holiday for Veterans Day.

In a post-election survey of clients, Bank of America Merrill Lynch found that 59 per cent of investors said Mr Trump’s election victory would not affect their cash holdings, while 46 per cent said the president-elect was most likely to pass a tax repatriation or infrastructure spending bill within his first 100 days in office.

The dollar index, a measure of the US currency against a basket of global peers, is 0.1 per cent firmer at 98.84, looking to record a fifth day of gains. The greenback is down 0.6 per cent against sterling at $1.2627, and the pound’s move to a one-month high is pushing the currency-sensitive FTSE 100 down 1.2 per cent.

Analysts at DBS said the US dollar has appreciated more against emerging market currencies than major global peers.

The Mexican peso continues to weaken, shedding 2.4 per cent to another record trough of 21.0552 per buck.

Emerging market currencies in Asia were under pressure on Friday, with the Indonesian rupiah sliding 1.1 per cent against the dollar and the Indian rupee off 0.6 per cent.

The losses come amid market speculation that Mr Trump’s tax cut and spending policies will push US rates up aggressively, luring investors back into dollar-based assets.

The US Treasury market is closed on Friday, but the 10-year yield (which moves inversely to price) closed overnight at 2.14 per cent — a 10-month high. The more policy-sensitive 2-year note is 0.92 per cent, also a multi-month peak, as the market places an 80 per cent chance that the Federal Reserve will raise interest rates in December.

Benchmark German Bund yields continue to march higher in sympathy — up 2 basis points to 0.30 per cent, the highest since February.

Gold, which tends to struggle when bond yields rise, is down $2 to $1,258 an ounce.

In Asia, Japan’s Nikkei 225 added just 0.2 per cent, establishing some calm after extreme volatility during the week — down 5.4 per cent on Wednesday, up 6.7 per cent on Thursday — when US election-related jitters saw the yen trade from its strongest in a month-and-a-half to its weakest since late July.

On Friday, the yen is 0.4 per cent firmer at ¥‎106.35 per dollar after data showed that Japan continued to struggle with deflation, as producer prices turned negative in October and were down 2.7 per cent year on year.

Hong Kong’s Hang Seng fell 1.4 per cent but on the Chinese mainland the Shanghai Composite rose 0.8 per cent after the People’s Bank of China fixed the trading band midpoint for the renminbi weaker than 6.8 to the dollar for the first time since September 2010.

Oil prices are softer for a second session, with Brent crude, the international benchmark, down 1.2 per cent at $45.27 a barrel and West Texas Intermediate off 1.3 per cent at $44.08.