A television screen displays a news channel showing U.S. President-elect Donald Trump making his victory speech, as a trader monitors financial data on computer screens on the trading floor. (Chris Ratcliffe/Bloomberg)

Global stocks and the dollar plunged on Wednesday as Donald Trump surprised investors by winning the race for the White House, but markets recovered some of their initial losses as a degree of calm returned ahead of the U.S. market’s opening.

On Wall Street, the three major stock indexes initially fell by as much as 5 percent in overnight trading, while futures trading in the Standard & Poor's 500-stock index was at one point temporarily suspended.

But the panic began to subside as investors factored in the effect of a weaker dollar and lower probability of a U.S. interest rate hike this year. 

A conciliatory acceptance speech by Trump also appeared to help calm nerves, with the Republican president-elect saying it was “time to bind the wounds of division.” A promise to rebuild the nation’s infrastructure was also seen as positive for stock markets.

The Mexican peso — which had fallen as the Republican nominee rose in the polls during his campaign — nosedived to an eight-year low, before recovering some of its losses to stand around 8.5 percent lower.

Early on the morning of Nov. 9, Republican President-elect Donald Trump addressed supporters in New York, declaring victory over Democrat Hillary Clinton. Here are key moments from that speech. (Sarah Parnass/The Washington Post)

The panic had stretched all the way to Asia, where Japan’s Nikkei index plunged more than 900 points, or 5.4 percent, Wednesday. In a flight to safety, gold charged higher, 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.

“Pollsters need to go away and have a holiday — every single one of them should be fired,” said Chris Weston, chief markets strategist at IG Markets in Melbourne. “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; Craig Erlam, senior market analyst for foreign exchange firm Oanda, called Tuesday's rout simply “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 both 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, many experts have warned that his proposals could wreck havoc on the U.S. recovery.

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

In Europe, the Stoxx Europe 600 index was down around 2 percent in early trading but recovered to stand 0.8 percent lower by midmorning. Germany’s main DAX index fell by around 1 percent, and London’s FTSE-100 was 0.2 percent lower.

“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 the southern Chinese city of 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 markets recovered some stability as investors dialed back their expectations that the Federal Reserve would hike its benchmark interest rate in December. The central bank had hinted it was ready to move following signs of economic resilience, but that could be threatened amid the turbulence in financial markets.

“We now expect the Fed is not going to raise rates in December,” said Marcel Thieliant at Capital Economics in Singapore. That, and the weaker dollar, had helped U.S. stock index futures recover, he said.

“Foreign earnings account for about half of the sales of S&P 500 companies,” he said. “Generally we take the view that markets should recover fairly quickly.”

At Lombard Street Research in London, head of strategy Andrea Cicione said the likelihood of modestly expansionary fiscal policy under Trump, including tax cuts and infrastructure spending, would help sentiment toward U.S. equities.

Trump’s fiscal plans would also probably be diluted by his own party, with Republicans likely to oppose dramatically expansionary fiscal policy, Cicione said.

“An initial bit of volatility was to be expected,” he said. “But a weaker dollar and some fiscal expansion — that’s a good thing for stocks. You should expect a rebound fairly soon.”

U.S. Treasurys initially surged on a flight to safety as results came in but soon reversed direction, and prices were slightly lower — and yields slightly higher — in later trading as investors began to price in slightly more inflationary and fiscally expansionist policies under Trump.

One of Trump’s most prominent supporters, billionaire Carl Icahn, also 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 help lift the economy out of the doldrums and unleash unprecedented growth that would allow his programs to pay for themselves.

“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. The head of Mexico’s central bank has compared a President Trump to a “hurricane” that could damage the country’s economy. In addition to hiking tariffs on its exports to the United States, Trump has made building a wall along the Mexican border a hallmark of his campaign. Already, the declining value of the peso has factored into the central bank’s decision to boost interest rates.

“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, Japan’s financial authorities and the board of South Korea’s stock exchange called separate emergency meetings in their countries Wednesday morning to discuss the sharp fall in the financial markets.

“We haven’t taken any measures regarding the stock market reaction to the U.S. election yet, but we are constantly monitoring the markets and the U.S. elections,” said Kang Byung-mo, head of financial market analysis at Korea Exchange.

Mui reported from Washington. Luna Lin in Beijing and Yoonjung Seo in Seoul contributed to this report.

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