The Dow Jones Stoxx 600 is off a mild 0.5% in late-European morning dealings after gapping lower at the opening. It closed the gap and is moving sideways, perhaps waiting for fresh directional cues from the US. 

The initial flight from risk assets saw the US 10-year yield fall from around 1.85% to nearly 1.70%, but it subsequently rose to 1.96% in early-Europe before consolidating near 1.90%. The curve itself is steepening. The two-year yield is off almost four basis points to 0.82%, while the 10-year yield is up now up five basis points at 1.90%. The five-year yields are also lower. Some observers are attributing the steepening to the anticipated fiscal plans of the new Administration.   

Asian bonds closed broadly higher, catching the risk-off phase. European bonds are mostly lower, but German and Dutch bonds are firmer. 

The Brexit shock has been followed by the US electoral surprise. Leaving aside the demographics and the polls, the common element is a retreat from the path of at least the last several decades. Is continental Europe next? The French center-right party, recently renamed Republicans, will hold a primary on November 20, with the second round on November 27. In early December, Italy holds a referendum on constitutional changes (reducing the role and size of the Senate). Next year, there are Dutch, French and German elections. The odds of a UK election and even an Italian election are not negligible.

Marc Chandler
Global head of currency strategy at BBH
Brown Brothers Harriman