Asian equities tumbled yesterday, extending a global sell-off, and the Mexican peso fell after a poll showed Donald Trump overtaking market favourite Hillary Clinton in the race for the White House.
With Clinton until last week comfortably ahead, traders were upbeat about her chances of winning on November 8 but news on Friday that the FBI were again looking at her e-mails has raised the prospect of Trump becoming president.
Trump is viewed as a wildcard, in part because of his harsh criticism of Federal Reserve chief Janet Yellen and international trade pacts.
“Since the FBI reopened its case into Hillary Clinton’s e-mails last Friday, her substantial lead in the polls has been decimated and some now even show Trump in the lead,” Craig Erlam, a senior market analyst at OANDA, said in a note.
“It’s been clear for some time now that markets would much prefer the stability that a Clinton victory would bring for the US economy and the reaction over the last 24 hours or so since the polls started to change so dramatically just confirms this.
Trump risk is well and truly being priced in again.”
The news battered markets on Wall Street and in Europe, while the VIX volatility index, which is seen as a measure of the US market’s fears, was sitting near levels last seen after Britain voted in June to leave the EU.
Those losses filtered through to Asia, where Tokyo closed 1.8% lower, while Hong Kong dived 1.4% in late trade and Shanghai ended down 0.6%.
Sydney and Seoul each sank more than 1% and there were also sharp losses in Wellington, Manila and Taipei.
Currency traders also took fright, fleeing into the safe-haven yen.
The greenback fell to ¥103.86 in Tokyo, down from ¥104.12 in New York and well off the levels of above ¥105 seen on Tuesday.
Analysts say a Trump win could also lead the Federal Reserve – which ends a policy meeting – to put off an expected December interest rate hike owing to worries about his effect on the economy.
“Even if the Fed does signal an inclination to lift rates in December, markets will take the view that this is unlikely if a Trump victory leads to uncertainty and a surge in financial-market volatility,” Ric Spooner, chief market analyst in Sydney at CMC Markets, said in an e-mail to clients, according to Bloomberg News.
However, the dollar was sharply up at 19.32 Mexican pesos from 18.85 pesos on Tuesday.
The peso is considered a proxy for Trump’s chances owing to his anti-Mexican rhetoric throughout the campaign including his pledge to remove undocumented migrants, build a wall and tear up a trade deal. The greenback also rallied against higher-yielding, risker Asia-Pacific units, soaring 0.9% against the South Korean won and 0.5% versus the Australian dollar.
A week-long retreat in oil prices also extended in Asia, with both contracts down almost a tenth from recent highs as investors grow worried about the chances of success for Opec’s September agreement to cut output.
In Tokyo, the Nikkei 225 down 1.8% at 17,134.68 points; Hong Kong – Hang Seng down 1.4% at 22,813.88 points and Shanghai – Composite down 0.6% at 3,012.73 points at the close yesterday.
Employees work at the Tokyo Stock Exchange. The Nikkei 225 closed down 1.8% to 17,134.68 points yesterday.