Daily Outlook 9 November 2016

Markets have clearly entered into a period of risk-off in the early hours of the morning, as the race for the U.S. presidency is significantly tighter than almost everyone predicted. At the time of publication the race was still too close to call, confounding expectations of a Clinton victory. Traditional safe haven assets were rallying strongly, with both gold and the JPY up nearly 3%, while oil prices had fallen by a similar margin. The Mexican peso, which has been looked at closely throughout the election campaign for what it says about the possibility of a Trump presidency, was -10% lower against the dollar at one point. Many other emerging market currencies such as the Turkish lira and South African rand were also down sharply. The election is far from over, but for financial markets the main near-term policy implication from a Trump presidency would be to lower the possibility that the U.S. Fed will raise rates in December.

To the extent that any of the data released over the past 48 hours still matters, the latest U.S. JOLTS survey published yesterday provided further evidence that the labor market was continuing to tighten, with the job openings rate climbing slightly higher to 5.4mn. The amount of voluntary ‘quitters’ (a bullish indicator since it highlights confidence in finding alternative employment opportunities) also rose marginally to 3.0mn. This came on the heels of the release of the latest U.S. Labor Market Conditions Index which hit a three-month high of 0.7 in October.

Turkish industrial production figures for September missed estimates by a wide margin, with output falling -3.1% y/y (-3.8% m/m), compared to expectations for a rise of 2.5%. This is the latest in a string of data releases in recent weeks which continue to suggest the economy has slowed sharply in the second half of the year. Figures on retail sales, tourism, credit growth, confidence and unemployment all point to weaker domestic demand conditions as we enter the final months of 2016.

Click to download full publication