by Eli Wright
It's official. Donald J. Trump has won the White House and Republicans have retained control of both the Senate and Congress. Markets were stunned this morning as the Republican candidate's come-from-behind victory became clear.
In Asia, the Nikkei took a nose-dive, closing down 5.36% at 16,251.54; the Hang Seng fell 2.29% to 22,388; and the Shanghai Composite dipped 0.62% to 3,128.45.
In Europe, the FTSE 100 opened at 6,702, down 2%; currently it's trading at 6,818 down just 0.37%; the DAX began the day down 3%, trading now at 10,351, a decline of 1.25%; the Stoxx 50 was also down 3% at the open, but is now trading at 2,973, down by 1.62%.
US markets remained cautiously optimistic yesterday and closed up, on the expectation that by this morning Hillary Clinton would be the 45th president elect. However, overnight, the election picture changed drastically and futures markets went into a tailspin, quickly dropping 5% at which point trading was briefly suspended. However, after Trump declared victory, futures began moving up, but remain down: S&P 500 futures are currently trading at 2,095.25, down 1.88%; the Dow is at 17,960, down 1.78% while the NASDAQ is at 4,697.25, down 2.2%.
Looking at the S&P monthly chart, above, despite clear upward movement, the Doji bearish reversal, along with indicators such as the MACD and RSI are currently showing a bearish divergence, indicating a possible, additional 10-15% downside. The market could potentially reach 1,730-1,830, where there is once again a strong demand threshold.
Forex
The US Dollar Index remains within its two-year range. However, over the short-term, the dollar is tanking against the euro and safe-haven currencies such as the yen and Swiss franc. Additionally, with the economic uncertainty of Trump’s presidency factored in, chances of a December Fed rate hike are dropping (they currently stand at 61.8%).
The Mexican peso has been moving lower for almost four years now, but the prospect of a Trump presidency has accelerated the trend.
The Mexican peso sank to an all-time, record low, falling more than 13%, before paring losses. It is currently down 8.24% to $0.0501. Mexico’s central bank has scheduled an emergency conference with the country's finance ministry later today, and may decide to raise interest rates in an attempt to stabilize the currency.
Commodities
Risk appetite, which has been wavering over the past weeks was quashed again this morning, and gold is up 2.54%, trading at $1306.65 and likely heading higher.
The yellow metal's monthly chart indicates it could hit a probable zone of $1,390-$1,420, possibly breaking above resistance from there. Silver has also gained, up 2.38% to $18.793.
Oil is holding at $45, while Brent is up 0.4%, to $46.20. the EIA Crude Oil Inventories weekly report will be released later today.
Natural gas futures fell yesterday to their lowest levels since August, as a warmer-than-expected start to winter deepened concerns of a possible supply glut. Currently, prices are down 0.08% to $2.631.
Stocks
Global stocks went into a tailspin as the morning progressed. It remains to be seen how heavily US markets will sell the news.
Companies reporting later today include:
Generic pharmaceuticals maker Mylan (NASDAQ:MYL) reports Q3 earnings after the close. It's forecast to show EPS of $1.51, a YoY gain of approximately 5%. Revenue is expected to increase yet again, it's been up every quarter since 2010. However, the real question is how significantly the recent EpiPen price gouging controversy, and ongoing price-fixing investigation will continue to affect the stock.
Restaurant chain Shake Shack (NYSE:SHAK) also reports Q3 results after the close. Expected EPS of $0.15 with revenues anticipated to rise by 2% this quarter. The company has beaten estimates in each of the last four quarters. SHAK has an annual average sales volume of around $5 million per restaurant, higher than any other fast food chain, but Q2 same-store sales growth (SSSG) was only 4.5%, less than the expected 4.9%, and a 61% decline from the 11.7% SSSG in Q2 2015..
Media giant Viacom (NASDAQ:VIAB) reported Q4 earnings this morning, beating EPS expectations of $0.65 to come in at $0.69; Revenues disappointed, however coming in at $3.23B, below the $3.49B expected.