US Elections Bring Asian Markets Down

At the time of this report, 3:00pm HK time, most Asian markets were over one percent lower, as the “fear index” on Wall Street has spiked higher over the presidential elections in the United States. The VIX climbed 2.86% trading at 19.07 as presidential race tightens. There is a good chance that Donald Trump might win and this is spooking the world’s financial markets.

The global financial markets have been spooked by recent polls that put Trump ahead of Clinton for the first time. Trump has a controversial platform policy that puts America first. He would renegotiate trade deals sparking a trade war. He will also clamp down on immigration. Clinton is perceived as the status quo candidate.

In the Down Under, the ASX 200 was down over 1.5 percent, as energy shares fell 2.3 percent. The heavily weighted financial sub-index was down almost 1.8 percent. In Japan, thanks to a stronger yen, the Nikkei 225 was down almost two percent. The USD/JPY Forex pair is trading near 103.59, at 3:00 HK time. This Forex market was near ¥104 yesterday.

In South Korea, the Kospi Composite Index has shed over 1.3 percent and in Hong Kong, the Hang Seng Index (HSI) has fallen over 1.3 percent on the day. IN China the Shanghai Composite is down 0.5 percent and the Smaller Shenzhen Composite is down 0.28 percent.

Overnight, on Wall Street the Dow Jones was lower as well as the Nasdaq Composite and the global benchmark, the S&P 500. There was a choppy trading day in which election worries cancelled out better-than-expected corporate earnings.

The CBOE Volatility Index, also called the “fear index,” as it shows market expectations on volatility (on a 30 day moving average) spike above the key 20 point level. Polls are now showing Trump to be leading over Clinton. The volatility index has risen over 40 percent over the last week. This is the first time the CBOE Volatility Index has risen for a week (six days in a row) since the Brexit vote. Traders are worried about a Trump presidency.

On the Forex front, traders will be watching the Federal Reserve and its monetary policy arm, the Federal Open Market Committee (FOMC). They FOMC will release its policy decision this afternoon, with accompany statement. Most analysts expect the Fed to stand pat but policy makers are expected to raise interest rates a minimum of 25 basis points in December. This should bring some Dollar volatility during the day.