Most European stock markets retreated Friday while the dollar rallied on the prospect of higher US interest rates, with dealers betting US president-elect Donald Trump’s planned huge spending policies will fire inflation.
Despite an all-time high close on Wall Street Thursday, investors across Asia and Europe turned cautious on uncertainties linked to a Trump presidency, while the Mexican peso hit a fresh record dollar low. US stocks opened lower as well on Friday.
After an initial shock, global equities rocketed Wednesday and rose further Thursday after Trump beat Hillary Clinton to win the US presidency, with investors hoping for business-friendly policies and measures to boost the US economy, a key driver of world growth.
However, there are also worries about his plans after saying he would tear up several trade deals while ramping up import duties.
“It’s been a Trumper-thumper of a couple of days in markets,” CMC Markets analyst Jasper Lawler wrote in a note to clients.
“The Trump dump was quickly followed by the Trump jump and now it seems we’re headed into the Trump slump.”
Expectations that Trump’s plans for huge spending projects will fan prices have lit a fire under the dollar as dealers bet the Federal Reserve will hike borrowing costs more aggressively to cap inflation.
That in turn has led to fears of large capital outflows as investors go back to the US for better, safer returns.
The greenback almost hit 107 yen on Thursday for the first time since July and it maintained most of the gains heading into the weekend.
The dollar meanwhile hit a new all-time high at just under 21.39 pesos.
The unit — as well as the Mexican stock market — has been hammered by fears Trump will follow through on campaign pledges to renegotiate the North American Free Trade Agreement, as well as pressure the country to pay billions of dollars for a giant border wall.
“The new Donald Trump vision for America is drawing the attention of international capital,” said Lawler.
“This renewed belief in a better environment for corporate America is at the expense of Europe and especially emerging markets.
“Malaysia and Indonesia have been caught in the eye of the emerging market storm. The central banks of both nations were forced to defend sliding currencies. Hot money has steamed across the Pacific into US assets,” he added.
– Key figures around 1430 GMT –
London – FTSE 100: DOWN 1.4 percent at 6,732.00
Frankfurt – DAX 30: UP 0.4 percent at 10,669.15
Paris – CAC 40: DOWN 0.7 percent at 4,498.01
EURO STOXX 50: DOWN 0.5 percent at 3,032.86
New York – Dow: DOWN 0.1 percent at 18,785.14
Tokyo – Nikkei 225: UP 0.2 percent at 17,374.79 (close)
Hong Kong – Hang Seng: DOWN 1.4 percent at 22,531.09 (close)
Shanghai – Composite: UP 0.8 percent at 3,196.04 (close)
Dollar/yen: DOWN at 106.36 yen from 106.84 yen Thursday
Euro/dollar: DOWN at $108.90 from $1.0895
Pound/dollar: UP at $1.2616 from $1.2552
Dollar/Mexican peso: UP at 20.94 pesos from 19.63 pesos
Oil – West Texas Intermediate: DOWN $1.01 at $43.65 per barrel
Oil – Brent North Sea: DOWN 91 cents at $44.93
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