- By David FrancisDavid Francis is a staff writer for Foreign Policy, where he oversees FP's breaking news blog, The Cable. An award-winning journalist, David has reported from all over Europe, Nigeria, Kenya, Mexico, and Afghanistan on terrorism, national security, the geopolitics of energy, global economics, and the European financial crisis. His work has been published in outlets including the Christian Science Monitor, the Financial Times Deutschland, Slate, and SportsIllustrated.com.
Six days ahead of the U.S. presidential election, and with Republican nominee Donald Trump surging in the polls, world markets are getting a bout of the jitters.
Stocks in Asia and Europe continued a months-long slump Wednesday following an ABC News/Washington Post tracking poll showing Trump with a one-point advantage over his Democratic opponent, Hillary Clinton. That was his first lead since May.
Clinton still has an advantage over Trump in most national polls, but the possibility of a Trump victory — something traders fear because of the uncertainty it would bring — spooked investors.
“Trump’s victory could lead to volatility, flight to safety, and sell-offs in stocks,” Soeren Moerch, the head of fixed-income trading at Danske Bank in Copenhagen, told Bloomberg on Wednesday. “We still think Clinton will win, and it will be business as usual, but it has become a very tight race.”
His comments follow a letter signed by 370 economists who warned Americans that electing Trump would be a catastrophic mistake. The number crunchers, who included a handful of Nobel laureates, said the Republican nominee is a “dangerous, destructive choice” as he “promotes magical thinking and conspiracy theories.”
Other indicators Wednesday also revealed concerns over a Trump comeback: Global stocks fell to their lowest level since July. The costs of Treasury notes and gold — generally safe investments — surged. The value of the Mexican peso dropped again; it has steadily decreased as the chances of a Trump victory have gone up.
Oil prices, already low, also fell. That came on top of a new crude increase of 14.4 million barrels in the week ending on Oct. 28. Announced Wednesday by the U.S. Energy Information Administration, the glut marks the largest weekly increase in the 34 years of data collected.
Finally, the VIX index — a volatility measure known more commonly as the “fear index” — is now at its highest level since Britain decided to leave the European Union in June.
U.S. stocks, in the midst of their longest slide since 2011, were down slightly Wednesday. But that’s likely more to do with the Federal Reserve than the prospect of a Trump victory. In a statement concluding a two-day meeting that ended Wednesday, the U.S. Central Bank held firm on current interest rates of between 0.25 and 0.5 percent. But it did hint that a rate hike could come in December, which would make it more expensive for consumers, financial service firms, and businesses to borrow.
In other words, six days ahead of the U.S. presidential vote, world markets are finally pricing the possibility of a Trump victory on Nov. 8. If Wednesday is any indication, his election would be followed by a global financial rout on Nov. 9.
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