U.S. stocks, bond yields jump after Trump shock, Mexican peso falls

Wed Nov 9, 2016 4:50pm EST
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By Sinead Carew

NEW YORK (Reuters) - Wall Street stocks rallied on Wednesday after a dramatic overnight sell-off, while bond yields jumped on inflation expectations and the Mexican peso was battered as investors reacted to Donald Trump's surprise win in the U.S. presidential election.

While equity investors' election night panic turned to daytime jubilation, bond investors worried Trump's protectionist policies would ultimately weaken the dollar and hike inflation.

U.S. 30-year Treasury bond yields gained almost 25 basis points in their sharpest rise in more than five years.

Benchmark U.S. 10-year note yields also advanced, climbing 21 basis points to their highest since January in their biggest increase in more than three years.

The U.S. dollar rose across the board and hit its highest against the Japanese yen in nearly four months. It gained support from the equity turnaround and the yield spreads, said Kathy Lien, managing director at BK Asset Management in New York.

The Mexican peso recouped some losses after falling to a record low. The currency has been vulnerable to Trump's threats to rip up a free trade agreement with Mexico and to tax money sent home by migrants to pay for building a border wall.

The three major U.S. stock indexes rose as investors piled into financial and healthcare stocks on hopes of weaker regulation than was expected from a Hillary Clinton presidency.

"The fact the Republicans control all three branches of government made a lot of people think that some of Trump's ideas that were pro-business - lower taxes and lower regulation - could actually be passed," Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.   Continued...

Traders watch, as Hillary Clinton addresses her staff and supporters about the results of the U.S. election, on the floor of the New York Stock Exchange (NYSE) the morning after the U.S. presidential election in New York City, U.S., November 9, 2016. REUTERS/Brendan McDermid