Risk assets crumbled as Trump gained upper hand in the U.S. election - TDS

Research Team at TDS, notes that the risk assets crumbled as Donald J Trump gained the upper hand in the U.S. election, winning key battleground states NC and WI.

Key Quotes

“US 10yrs staged a massive outside reversal day, yields falling as much as 14bps at one stage, reaching 1.7145% lows, but was unable to break below the 50d and 200d moving average. Some of the risk-off move in fixed income is now being unwound, US 10yrs -10bps, which is helping steepen the curve, with expectations for a Dec hike falling below 50% also supporting the move. ACGB 10s are 14bps lower in yield and surprisingly the curve is unchanged, not flatter on the risk-off move. These risk off moves could see the RBNZ “surprise” with a dovish cut early tomorrow morning, but NZGB 10yrs have lagged the drop in yields, -8bps.

Over in FX, the JPY and CHF were the key outperformers, +3.5% and +2% respectively, pushing the DXY lower -1.3%, but the commodity currencies underperformed, AUD -1.8%, CAD -1.4% and NZD -0.9%. Because of these moves, the AUDJPY was thumped, -5%, USDCAD touched 1.3500, but other than the KRW -1.7%, most of the Asian crosses were not down as much as one would have initially anticipated, the decline in the DXY cushioning the falls on the Asian currencies.

Over in EM FX, the MXN dropped like a stone, off -13%, above 20 once Trump won Ohio, ZAR -4% and TRY -2.5%. Needless to say, equity futures are bathed in a sea of red, SPX futures down 5% and now suspended and VIX futures have spiked as much as 8 points to 23. In our region, the Nikkei has fared the worst, -4.2% and other indices are off 2 to 3%.  The dispersion in the commodity space is large, but consistent with the risk off tone. Gold has rocketed, US$55, +4.4%, copper -2%, oil -3.5%, but iron ore bucks the trend, up a stunning 6%.  So to wrap up, MI and PA remain the key states to watch, with Clinton in the lead in PA and Trump leading MI. Trump’s odds of becoming the next President have now increased considerably. The Senate and House are now both expected to remain Republican, with the chances of a Republican sweep rising sharply.”