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The Bank of England has released the results of its latest round of its annual banking stress tests and its semi-annual financial stability report this morning. Used to measure the resilience of a bank’s balance sheet in adverse scenarios, the stress tests measured the impact of a severe slowdown in Chinese growth, a global recession […]

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Draghi: Eurozone will decline without vital productivity growth

It’s productivity, stupid. European Central Bank president Mario Draghi has become the latest major policymaker to warn of the long-term economic damage posed by chronically low productivity growth, as he urged eurozone governments to take action to lift growth and stoke innovation. Speaking in Madrid on Wednesday, Mr Draghi noted that productivity rises in the […]

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Asia markets tentative ahead of Opec meeting

Wednesday 2.30am GMT Overview Markets across Asia were treading cautiously on Wednesday, following mild overnight gains for Wall Street, a weakening of the US dollar and as investors turned their attention to a meeting between Opec members later today. What to watch Oil prices are in focus ahead of Wednesday’s Opec meeting in Vienna. The […]

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Banks, Financial

RBS emerges as biggest failure in tough UK bank stress tests

Royal Bank of Scotland has emerged as the biggest failure in the UK’s annual stress tests, forcing the state-controlled lender to present regulators with a new plan to bolster its capital position by at least £2bn. Barclays and Standard Chartered also failed to meet some of their minimum hurdles in the toughest stress scenario ever […]

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Barclays: life in the old dog yet

Barclays, a former basket case of British banking, is beginning to look inspiringly mediocre. The bank has failed Bank of England stress tests less resoundingly than Royal Bank of Scotland. Investors believe its assets are worth only 10 per cent less than their book value, judging from the share price. Although Barclays’s legal team have […]

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Categorized | Capital Markets

How Trump’s victory changed markets: in charts

Posted on November 18, 2016

You can read a fuller analysis of the markets moves here.

Donald Trump’s shock presidential election victory wrongfooted many investors and triggered a convulsion across financial markets — although not always in the way analysts expected.

Here are some charts that show how markets have been upended by the unconventional Republican candidate’s triumph and expectations that he will unleash a big economic stimulus package of tax cuts and infrastructure spending.

Our first chart is of the DXY dollar index, which has powered higher on predictions of quicker economic growth and subsequently higher interest rates sucking in foreign capital.

The second chart shows how bank shares have bounced sharply higher on expectations of a regulatory rollback and higher interest rates, while utility stocks — until recently much loved for their healthy dividend yield — have sagged precipitously.

Staying with the winners, this chart maps out the performance of US small-caps companies, many of which will be shielded from the dollar index as most of their revenues are generated domestically.

But developed markets in general have been winners from greater growth expectations and receding fears over deflation, while emerging markets have sagged on strong dollar and trade war concerns.

Staying with the developing world, here is a chart that shows emerging market currencies tumbling sharply since the US election, led by the Turkish lira, Mexican peso and Brazilian real.

The global bond market has generally been one of the biggest losers, as the possibility of faster inflation and sky-high valuations have spurred investors to dump exposure.

Here is a chart that shows just how much the value of the global fixed income market — as measured by the Bloomberg Barclays Multiverse index — has tumbled since the US presidential election.

That has pushed the yield of the 10-year US Treasury bond, one of the most closely watched, influential financial gauges on the planet, to a year high of 2.3 per cent.

The past two weeks have been particularly unkind to longer-dated bonds, which are more sensitive to interest rate changes. Here’s the yield of the 30-year US Treasury, which this week rose above 3 per cent again for the first time since January.

At the centre of a particularly painful Venn diagram of long-dated debts and emerging markets stands Mexico’s “century bond”, which matures in 2110. Its value has tumbled by more than 13 per cent since the US election, pushing the yield to a peak of 6.4 per cent.

Another victim — albeit an unexpected one — from the “Trump tantrum” is gold. The precious metal was expected to gain if the Republican won the presidency, especially since his policies are expected to be inflationary. Instead, gold has been hit by higher rates and the stronger dollar over the past two weeks, paring its gains this year.