U.S. stocks are headed for a historic plunge when markets open Wednesday morning, as investors reassessed prospects as Donald Trump neared victory.
Futures were pricing in the largest declines in U.S. equities since the 2008 financial crisis, with the Dow Jones Industrial Average and Asian equities plunging Tuesday night as early election results showed Trump performing better than expected.
Futures for the Dow Jones Industrial Average were down as much as 750 points, or nearly 4 percentage points, as Trump neared the number of electoral votes necessary to secure the White House.
Global markets showed other signs of major stress. Japan’s Nikkei 225 collapsed more than 5 percent, and other Asian stocks fell dramatically.
Meanwhile, the Mexican peso, which has moved with Trump’s odds, weakened against the dollar as the night went on, falling as much as 10 percent, the largest such decline since the 1994 currency crisis.
Crude oil prices also plummeted the most in three months in trading in Asia. Gold soared 2.5 percent to $1,316 an ounce.
Those signs of market turmoil are similar to the ones that elicited a major response from U.S. regulators following the United Kingdom’s June 23 referendum vote to leave the European Union.
“The whole world now sees the similarity between U.S. election and Brexit,” First Trust Portfolios chief economist Brian Wesbury tweeted early Wednesday.
Following the U.K. referendum, the Federal Reserve took the unusual step of issuing a statement reassuring markets that it was monitoring the situation and was prepared to provide liquidity to foreign central banks. Investors already expect that the Fed will react to Tuesday night’s volatility by keeping monetary policy looser for longer: Bond market prices Tuesday indicated that markets significantly downgraded the odds of a Fed interest rate hike in December, which had been largely expected.
Markets appeared to be reacting negatively both to the prospect of a Trump presidency, with some analysts raising concerns about the impact of his trade policies on Asian stocks, and to the general uncertainty created by a Hillary Clinton loss, which was unexpected.
U.S. stocks had demonstrated in recent weeks that a Clinton victory was built into stock prices, with markets slipping when the FBI informed Congress that it had reopened an investigation into her email management when she was secretary of state, and then rising again when the investigation was wrapped up without new revelations.
With a Trump victory, “you’ll get a knee-jerk selloff,” said Jeffries chief global equity strategist Sean Darby on Bloomberg News, although he also said that the impact for stocks would be “quite neutral.”
