Trump storm hits stocks again

- Reuters, LONDON
The political jitters coming out of the United States remains the dominant factor for traders

May 19, 2017-Swirling uncertainty over US President Donald Trump’s political future saw world stocks extend their steepest fall in over six months on Thursday, though there were signs of stabilisation elsewhere as the dollar and gold steadied.

Reports that Trump had tried to intervene in an investigation into alleged Russian interference in last year’s US election and that his aides had numerous undisclosed contacts with Russian officials kept market tensions high.

Asian stocks fell sharply after Wall Street suffered its worst day in over eight months overnight [.N] and Europe’s main bourses dropped between 0.8 and 1.3 percent as the selling momentum built again. Rabobank strategist Michael Every said the key question was whether markets would “calm down, or panic more.”

“The obvious point we’ve made before repeatedly is that Trump now has much less political capital to spend in the Capitol, and that makes Trumpflation far less likely. Yet things seem to be rapidly moving beyond that point, opening up other scenarios,” he said.

While stocks flashed warning lights again, the dollar seemed to be going for the ‘calm down’ option.

It pulled out of a dive that had taken it to its lowest level in six months against other top currencies including the euro and the yen.

A mini-recovery in Asia as Japan posted its best economic performance in a year looked to have run out of steam however. It eased back again in European trade to leave it at $1.1136 per euro and buying 110.97 Japanese yen.

There was more support for the euro too as one of the European Central Bank’s most influential policymakers, Executive Board member Benoit Coeure, said it should not delay paring back its stimulus once it was convinced inflation has recovered.

“Too much gradualism in monetary policy bears the risk of larger market adjustments when the decision is eventually taken,” Coeure told Reuters in an interview in which he also said the bank’s bond-buying programme was “not set in stone”.

The political jitters coming out of the United States remained the dominant factor for traders, however.

Germany’s benchmark 10-year Bund yield fell to a two-week low and US Treasury yields were flat having dropped as far as 2.2120 percent the previous day, which had been a one-month low.

The allegations surrounding Trump have not only thrown doubt over the future of the pro-growth policies he promised, but they have raised the possibility he could end up leaving the White House prematurely.

Trump says he is being given one of the toughest rides of any president in US history

Published: 19-05-2017 09:27

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