FINANCIAL markets went into the election night both favouring and expecting a Clinton victory. And the early results seemed to point to success for the Democrat candidate. But as the night wore on, Donald Trump’s position steadily improved and investors started to lose their nerve.

The Mexican peso was the most sensitive emerging-market currency to the election news, given Donald Trump’s promises to build a wall on the border and his talk of renegotiating the Nafta free trade agreement. During the day, the peso was around 18.5/$ and it reached as high as 18.18/$ in early polling. But as the key state of Florida moved from a Clinton to a Trump lead, the peso plunged to more than 20 to the dollar. In contrast, the dollar lost ground against other major currencies, falling 3% against the yen.

A similar reaction was seen in equities. On November 7th, when Clinton’s lead in the polls was strengthening, the Dow jumped 300 points. As the Trump camp gained ground, the Dow futures lost 600 points. Assets perceived to be safe gained ground. The ten-year Treasury bond yield fell from 1.88% to 1.73%, as bond prices rose, while gold rose nearly $50 an ounce.

So why are the markets worried? First of all, the policy statements of Mr Trump have been both vague and erratic—on issues such as trade, foreign policy, the independence of the Federal Reserve and even the commitment to repay Treasury bonds in full. What is hard to know is how serious his policy proposals might be, and how much Congress would allow him to enact. He has more freedom in foreign policy areas than in the domestic arena. That is why emerging markets might take the greatest hit. In Asian trading, the Kospi index in South Korea was down nearly 3%, while the Japanese stock market was down more than 4%.

If Mr Trump wins, there will be some nervous weeks ahead as the markets try to get a sense of what kind of team he puts in place. At some point, of course, markets will find some comfort. The Fed might decide not to raise rates in December, given the uncertainty, while a Republican-controlled Congress might push through substantial tax cuts. Both would be perceived to be good for equities. But this is not the result investors wanted.