UK Economics

FTSE 100 bounce back after £37bn dive on Donald Trump US election win

POUND Sterling is at $1.24 and the FTSE 100 has bounced back amid a nerve wracking day for investors as the US election results declare Donald Trump as president.

The US election results have been declared and Donald Trump’s historic victory has sparked serious volatility in the markets today.

The FTSE 100 was down 144 points, around two per cent to 6696.3, and the FTSE 250 opened down 300 points.

That immediate fall wiped £37bn off the value of the UK’s biggest listed companies in just a few minutes – however the market has now bounced back with mining and pharma stocks driving the surge.

But there’s more drama to come say experts as the pound initially peaked at $1.25 and then dropped back to $1.24.

Kathleen Brooks, research director at City Index said: “The first speech by President-elect Trump has had a calming effect on the markets. The FTSE 100 fell at the London open, but not by as much as the futures market was predicting.

“Could the markets be hoping that … he may actually be more establishment and less maverick than he portrayed himself throughout the campaign?

“At this stage we can’t answer these questions, but they give the markets lots to ponder today.”

Donald Trump is US President and FTSE 100 and pound reactGETTY

The FTSE 100 and pound are reacting to the Donald Trump becoming President

The presidential race is much closer than anyone had expected

Andreas Johnson, economist at SEB,

Rob Boardman, European CEO of equities broker ITG: “Trump’s shock victory has led to a very busy open, with 3x the normal volume in the first 30 minutes of trading. Fast money flows are driving the volume, but there have been relatively few block trades.

“Many stocks, especially Swiss, have extended auction periods. Healthcare stocks have opened strongly, reversing some of the losses in recent weeks.”

Connor Campbell of Spreadex said: “The FTSE is down just shy of 2%, with the DAX and CAC falling 2.8% and 2.5% respectively. Yet there is surely more to come, especially with a US open that could see well see the Dow Jones post its biggest ever single session slump.

“Gold was understandably the rare-winner this morning, rising 2.5% with plenty more growth likely to come in the next few days and weeks. The dollar, meanwhile, is being hammering by the euro, losing around 1%, but isn’t faring too badly against the Brexit-blighted pound, falling a mere 0.2%.

And the news has already been declared as “Brexit all over again” as the UK wakes up to the news that Trump is president.

The London futures market has dropped more than four percent last night, while US stock markets plummeted in after hours trading while the pound rallied against the dollar.

However as the news of a Trump victory is official there’s a roller coaster ride ahead for investors this morning.

Eric Lonergan, of M&G Investments said: “The surge in anti-establishment sentiment is definitively global. Brexit can no longer be dismissed as a freak event. It is a trend. Donald Trump looks almost certain to win, by defying his party, the media, and conventional politics. Populism is coming to power. The critical issue now is what this mean in practice.

“The immediate market reaction is predictable. Risk assets have fallen sharply, safe assets are rallying, and the dollar is falling. It’s deja vu all over again. Like Brexit, will we see a reversal in asset prices in the next weeks or months?

While Jasper Lawler, of CMC Markets says the pound could find itself back at $1.30 today said: “President Trump said his election would be bigger than Brexit – and as far as financial markets are concerned, that is already true.

“European stocks are projected to open between 4 and 5pc lower, wiping off billions in market cap in one fell swoop of Trumpism. Since the US is the world’s largest economy and the US dollar is the world’s reserve currency, it still holds true that when the US sneezes, the rest of the world catches a cold.”

“The pound could find itself back to 1.30 to the US dollar in the next few days, a level that many see as export-boosting but not destabilising nor too inflationary.”

He said: “The presidential race is much closer than anyone had expected and polls have shown a tightening both nationally and in swing states over the past two weeks.

“Equity markets have retreated while safe haven assets such as gold have risen.

“A Trump victory would be a clear risk off event that would trigger significant reactions and equity markets would take a sharp hit, at least in the short term.

Donald Trump is US PresidentGETTY

Donald Trump won the US President election after Hillary Clinton called to concede

“Emerging market assets look particularly vulnerable as safe haven flows would put pressure on assets perceived to risky.”

 “However, the tightening of the polls indicate that the risk of a very close result is substantial. In this scenario the election result could be up for challenge and equity markets could suffer from a prolonged period of uncertainty. The 2000 presidential election resulted in a month of uncertainty and such a scenario could weigh heavily on stock markets.”

Meanwhile speculators claim the ‘wildcard’ Donald Trump presidency will not be something investors will warm to.


Philip Smeaton, Chief Investment Officer at Sanlam Private Wealth said: “Trump would be a wildcard president and one that few investors would welcome.

“Trump’s policies would likely see a destabilised financial system and damaged international trade relationships. It’s not all doom and gloom though – Trump’s pro-business taxation policies may mitigate some of the damage done to the wider economy.

 “In these times of economic uncertainty it is easy to get swept up in the headlines and look to find simple answers for what are, in reality, complex situations.

“We can speculate on the market impacts of macro events like the US election, but the reality is that most often they will have less long term impact than some would have you believe.

“The important thing is to ensure that any investments are well diversified to minimise the impact of any immediate market fluctuations.”

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