Complex Made Simple

Trump leads for first time: jumpy markets react

* Trump has a one percentage point edge over Hillary in ABC News/Washington Post polls

* Wall Street’s fear index “VIX” soared above 20 levels for the first time since September 12

* Most Gulf stock markets fell early today after drops in global bourses


As email scandals continue to entangle Democratic candidate Hillary Clinton, her Republican counterpart in the US presidential race Donald Trump has taken the lead for the first time in polls.

The business magnet has a one percentage point edge over former US Secretary of State in the ABC News/Washington Post tracking polls released on Tuesday.

Trump scored 46 per cent to 45 per cent in the survey taken from October 27 to 30, making it his first margin over Clinton who has been battling with the heightened criticism after it appeared that FBI was investigating new emails discovered from a laptop of her top aide’s husband.

The Manhattan-based billionaire, who has investments worldwide, including the Middle East, had lost 12 points in the same polls on October 23 but the latest improvement in less than a week to the elections has boosted his hope of victory.


Markets respond blatantly

Global stock markets slipped lower on Wednesday as fears emerged that Trump was closing the gap with Clinton to win the elections after fierce campaigns. Top government and business executives and analysts from across the world, and the Middle East in particular, have raised their concerns over Trump’s stance on issues concerning foreign policy, economic and trade relations, war on terror and immigrants. FXTM Chief Market Strategist and regular contributor on AMEinfo, Hussein Sayed, says the markets are in early stage of panic. Here is a detailed analysis from Sayed:

Most major Asian equity indices fell by more than 1 per cent, as Wall Street’s fear index “VIX” soared above 20 levels for the first time since September 12. The Mexican peso which has become the popular election proxy also fell this morning, declining by more than 4.3 per cent for the past six trading days.

The dollar was also hit, plunging to three weeks low versus the euro and one month low against the swiss frank as U.S. 10-year treasury yields fell 7 basis points from yesterday’s highs. Neither earnings nor economic data will provide market direction and it’s going to be a roller coaster ride for the next couple of days as a Trump win appears similar to a Brexit style reaction and probably more severe.

The post Brexit vote market reaction is still fresh in investors’ memory and no one wants to be caught on the wrong side of the trade, it will only take another one or two polls showing a Trump lead to boost markets anxiety and thus a steep sell off in equity markets and high beta currencies.

Gold is likely be the most wanted asset to hedge against political risks, and although it jumped 4 per cent from October’s low, there is still much potential to go higher from current levels.

The Fed is expected to stand pat on rates when they announce policy later today, and while recent round of economic data justifies a rate hike, the Fed doesn’t want to influence the presidential election outcome either way. In a recent report, I expected the Fed to deliver a strong signal on raising rates in December by reiterating a similar sentence from October’s 2015 statement:

“In determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress both realized and expected toward its objectives of maximum employment and 2 percent inflation.”

Although I still believe it’s possible, chances now stand at 50 per cent.


Gulf follows global trends

Most Gulf stock markets fell early today after drops in global bourses and oil prices, but banking shares continued to support Saudi Arabia.

Dubai’s index fell 0.7 per cent with Emaar properties losing 0.9 per cent, while a 2.4 per cent slide in telecommunications operator Etisalat helped to pull Abu Dhabi’s index down 1.0 per cent.

Qatar’s index also dropped 1.0 per cent to 10,098 points as petrochemicals and metals blue chip Industries Qatar sagged 1.6 per cent.

The index is close to confirming a clean break of technical support at 10,153-10,160 points, where its September low coincides with its 200-day average. That would break the consolidation range of the past six weeks, pointing down to around 9,800 points.

Kuwait’s also stock index fell 0.4 per cent.

(With inputs from Reuters)