Europe open: Stocks drop and gold rallies as Trump wins US election

European stocks fell, the dollar tanked against the yen and gold rallied on Wednesday as investors looked for a safe place to park their cash after Donald Trump won the US presidency

At 0900 GMT, the benchmark Stoxx Europe 600 index was down 1.5%, Germany’s DAX was 1.8% lower and France’s CAC 40 was off 1.7%. Although the losses were significant, the main indices were already well off their earlier lows as investors mulled over the implications of a Trump presidency.

Healthcare shares bucked the trend, with the Stoxx 600 sub-index for the sector up 2.1%. A win for Clinton had been considered bad for the sector as she had made it clear she wanted to increase regulation and combat high drug prices.

Deutsche Bank said in an equity strategy note: “Healthcare, telecoms and food & beverage tend to outperform when US policy uncertainty rises and have been positively correlated with Trump’s poll ratings. Conversely, banks, insurance and capital goods tend to underperform on rising uncertainty. Resources should be negatively affected by USD strength and lower commodity prices.”

The pound was not a strong as had been expected in the event of a Trump win, up just 0.2% versus the dollar at 1.2401, while the euro was 0.7% higher at 1.1102. But the greenback crashed 1.7% lower against the yen to 103.35. At the same time, the Mexican peso plunged to an all-time low against the dollar.

Meanwhile, gold prices enjoyed their biggest rally since Brexit as the 'risk off' mode took over and investors fled to safety.

Oil prices retreated, with West Texas Intermediate down 1.2% to $44.42 a barrel and Brent crude down 1.1% to $45.54.

Although investors are generally uneasy about the lack of any specifics details underlying some of Trump’s proposals, it seemed as though his acceptance speech may have calmed some market participants.

Ipek Ozkardeskaya, senior market analyst at London Capital Group, said: "Although the knee-jerk market reaction was comparable to the Brexit night, the global markets bind up wounds much faster than the UK’s June 23rd referendum.

"Donald Trump’s first speech as the US President triggered optimism across the markets, given that Trump delivered a fairly balanced discourse, while compared to the very sharp tone he had displayed during his election campaign. A substantial correction is underway after the equity indices and futures got hammered in Asian trading."

In corporate news, Sainsbury's was sharply lower after it cut its interim dividend 10% as underlying profits fell the same amount despite revenues increasing as the decline in like-for-like sales eased off in recent months.

Burberry was also under the cosh after it said half-year revenues and profit decreased as the luxury fashion house implemented a turnaround plan to cut costs and revamp its products.

Munich Re was in the red after raising its full-year profit guidance and reporting an increase in third-quarter profit.

Rio Tinto edged down after it suspended a top executive, while another stepped down amid a payments probe.

Alstom bucked the trend, up more than 5% after the French engineering group posted a rise in first-half sales and operating margins.