Before Donald Trump even speaks, global markets freaked

Buckle your seatbelts, it’s going to be a bumpy ride when trading opens Wednesday on Wall Street.

Stocks in Asia immediately skidded in trading early Wednesday as Donald Trump inched closer to securing the electoral votes to capture the U.S. presidency. Global government bond yields tumbled as investors fled stocks to the safety of low-paying bonds.

Wealth was being erased in instants across time zones as markets took in the possibility that Trump, who has promised to rip up trade deals and challenge China with an America-first approach, could come to power. Adding to concerns were Trump’s earlier comments that he might default on U.S. debt.

“The markets’ main concerns include Trump’s protectionist policies, focusing on potential trade wars with China – America’s largest trading partner – and with Mexico, it’s third largest,” Nigel Green, CEO of deVere Group, a British advisory firm for rich investors, wrote in an investment note early Wednesday.

Stock futures, which trade during off hours on the expectation of what will happen when trading begins in New York, signaled a sharp selloff, similar to what happened when British voters defied expectations and voted to exit membership in the European Union.

Shortly after midnight in New York, stock futures that track the S&P 500 were off by 5 percent. Futures for the open of the Dow Jones industrial average effectively hit the floor they’re allowed before they can trade no lower before the open, sort of a rule-caused halt to trading. It means anyone who had $100 invested in a mutual fund that tracks the S&P 500 stood to lose $5 right at the open. Multiply that over millions of Americans with retirement plans, and billions of dollars of wealth stand to be erased amid market turmoil.

Investment analysts warn ordinary investors against exiting the market during a stampede-like selloff because it raises the risk of locking in losses and missing the rebound that often follows days, weeks or months later.

The market volatility suggests Trump’s presidential credibility would be tested immediately, as he may have to try to calm the same financial markets that during the campaign he suggested were overvalued and reflected a speculative bubble. Like Ronald Reagan decades earlier, Trump is an unknown quantity as a national political leader. But unlike then, global financial markets are deeply interconnected.

As voting drew to a close Tuesday, high voter turnout in Pennsylvania and Florida sparked a rally in stock futures trading as investors cheered what they thought was the status quo amid an improving economy.

Wednesday is sure to be a rough day as well for Mexicans, whose currency, the peso, had become a proxy for the U.S. elections.

Trump’s promise to build a border wall and renegotiate the North American Free Trade Agreement has battered the peso, ironically making Mexican-made goods coming into the United States even cheaper for consumers. After recovering on Monday when polls suggested a Clinton win, the peso lost more than 11 percent of its value, to 20.37 to the dollar, in after-hours trading early Wednesday.

In Japan, where the Nikkei industrial average had plunged more than 5.3 percent. Hong Kong’s Hang Seng index was off more than 3.5 percent in afternoon.

European stocks were poised to sell off at the open, and the global rout was expected to hit U.S. shores at the 9:30 am opening of trading in New York.

This story was originally published November 8, 2016 at 11:48 PM with the headline "Before Donald Trump even speaks, global markets freaked."