Global markets rocked as traders see likelihood of Trump victory

Global financial markets plummeted Tuesday night as Donald Trump claimed the lead in the race to the White House, projected as the winner in key swing states such as Ohio and Florida.

On Wall Street, all three major stock indexes were down 4 percent or more late Tuesday evening in premarket trading, with futures for the Dow Jones industrial average sliding more than 700 points. Futures trading was temporarily halted for the Standard & Poor’s 500-stock index amid a 5 percent loss. The Mexican peso – which has fallen as the Republican nominee rose in the polls during his campaign – nose-dived to an eight-year low, according to Bloomberg News. The panic stretched all the way to Asia, where Japan’s Nikkei index plunged more than 900 points at one point, or 5.4 percent.

In a flight to safety, gold charged higher. U.S. Treasurys and the yen also surged.

The assumption that Democratic nominee Hillary Clinton would notch a comfortable victory had boosted markets earlier in the week. But on Tuesday night, investors began to grapple with the possibility that Trump’s controversial proposals to rip up long-standing trade agreements, deport millions of immigrants and radically re-engineer the tax code could become reality.

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“It’s all a little bit crazy now,” said Chris Weston, chief markets strategist at IG Markets in Melbourne. “Pollsters need to go away and have a holiday – every single one of them should be fired. Markets weren’t prepared for this.”

The sell-off recalled the volatility following Britain’s decision this summer to leave the European Union. Investors had largely dismissed the possibility of a so-called “Brexit” but then quickly reversed course as the votes were counted. That dynamic appeared to be playing out again, with Craig Erlam, senior market analyst for foreign exchange firm Oanda, calling Tuesday’s rout “a bloodbath.”

Among Trump’s chief campaign promises has been to pull out of the North American Free Trade Agreement and slap double-digit tariffs on goods from Mexico and China, moves that experts fear could spark a trade war. He also has proposed massive tax cuts for individuals and corporations that could cost as much as $6 trillion, according to the nonpartisan Tax Policy Center. Though Trump’s message of isolationism has resonated with voters who feel left behind by globalization, experts have warned his proposals could wreak havoc on the U.S. recovery.

Moody’s Analytics forecast Trump’s policies could lower employment by 3.5 million jobs and raise the jobless rate to 7 percent by the end of his term. The firm also predicted the nation would enter a recession in 2018.

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“Trump has not held any public office before and lacks experience of making currency and fiscal policies. He also has extreme views,” said Yang Delong, chief economist at First Seafront Fund in Shenzhen. “All these will be viewed by the investors as huge uncertainty. That’s why the markets are down and the gold price is going up.”

But one of Trump’s most prominent supporters, billionaire Carl Icahn, predicted that the sell-off would be short-lived. Many of Trump’s proposals have been lacking in detail, but his campaign has broadly argued that his aggressive stance would lift the economy and unleash unprecedented growth that would pay for his programs.

“It’s going to cost the rich guys in New York money, and that’s too damn bad,” Icahn said on CNBC on Tuesday night. “But you have to think about where this country is going to be in the next five, 10 years, and you can’t have it going the way it’s going.”

However, the prospect of a Trump presidency was enough to persuade Mexican leaders to meet last week to craft a “contingency plan” in the event of an “adverse” election result. In addition to hiking tariffs on Mexico’s exports to the United States, Trump has made building a wall on the border a hallmark of his campaign.

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“It’s the Pavlovian response: The bell rings, Trump does better, the Mexican [peso] sells off,” said Ed Shill, chief investment officer at QCI Asset Management.

Meanwhile, the board of South Korea’s stock exchange called an emergency meeting Wednesday morning to discuss the sharp fall in the financial markets.

In China, the Communist Party’s China Daily newspaper said that whoever wins, democracy would be the loser in the United States, noting the race was viewed as a “chaotic political farce” in many people’s eyes.

European leaders never hid their overwhelming preference in the U.S. vote. Among major U.S. allies across the Atlantic, leaders spoke openly of their contempt for Trump and their fear of the consequence should he be elected.

President Fran├žois Hollande declared that some of Trump’s policy positions made him want “to retch.” The British Parliament even debated banning the New York billionaire from its shores.

The exception to the anti-Trump sentiment in Europe came from far-right leaders and other anti-immigration populists.

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Congcong Zhang, Luna Lin and Jin Xin in Beijing and Griff Witte in London contributed to this report.