Markets Right Now: Washington turmoil unnerves markets

Andrew Cummings
May 19, 2017

Crain's New York Business reporter Aaron Elstein says investors are now nervous this controversy could prevent the president from accomplishing any of his agenda, which was meant to create jobs and boost the economy.

USA stock indices suffered their worst trading day in eight months on Wednesday, as concern mounted that political turmoil in Washington could derail President Donald Trump's efforts to push through pro-growth policies.

Stock markets in Europe and Asia declined Thursday, a day after US stocks, the dollar and USA government bonds were down amid investor worries about controversial actions and comments from President Donald Trump.

The Dow lost 370 points on Wednesday recording its worst day since September previous year.

Banks and other financial companies led US stocks sharply lower in afternoon trading Wednesday as bond yields tumbled.

"Prior to the election investors expected Trump to represent uncertainty", he said. It's a classic flight to safety bet.

The Standard & Poor's 500 index slumped 24 points, or 1.03 percent, to 2,375.

The Dow Jones Industrial average dropped about 250 points after opening Wednesday morning, and the S&P 500 Index dropped more than 26 points. The Nasdaq composite index gave up 132.2 points, or 2.1 per cent, to 6,037.69, a day after closing at its latest record high.

United States equities fell sharply on Wednesday as political turbulence in Washington prompted investors to unwind previous bets based on hopes for tax and other reforms from the Trump administration. The broader Russell 2000 index was down 1.65 per cent.

The turmoil engulfing President Donald Trump's administration spilled into financial markets as USA stocks fell the most since March, measures of volatility spiked higher and Treasuries rallied with gold. They also had risen sharply in the months after the election.

CALM RIDE ENDING? The market is coming off an unusually long period of calm after hitting a series of record highs. The 10-year Treasury yield fell to 2.22 percent from 2.33 percent late Tuesday.

Bond prices rose sharply.

This took some of the string out of Wednesday's revelation in the press that Comey had, in a private note after meeting with Trump, written that the president had expressed "hope" that the investigation into ties to Russian Federation and Turkey by former national security advisor Michael Flynn would be dropped.

Though the White House has denied the allegation, there's mounting unease in markets over the developments in the USA government.

The faltering markets follow Trump's firing of the FBI chief, Trump reportedly sharing secrets with top Russian officials, and allegations that the president may have tried to block an investigation into actions by a top aide who was sacked.

On the corporate front, Advanced Micro Devices fell in pre-market trade after it laid out its growth plans late on Tuesday.

METALS: The price of gold jumped 1.8 percent, climbing $22.30 to settle at $1,258.70 per ounce. The blue-chip bank stocks, JPMorgan and Goldman Sachs, had the worst days, dropping 3.8% and 5.3%, respectively.

CURRENCIES: Unease over the potential implications of the latest political fallout in Washington weighed on the dollar Wednesday. The dollar is below where it was on election day, and Treasury yields are below their March highs.

ENERGY: Benchmark U.S. crude oil futures slipped 15 cents to $48.92 a barrel in electronic trading on the New York Mercantile Exchange. The financial sector closed down 3 per cent, while the technology sector fell 2.8 per cent. Wholesale gasoline was little changed at $1.60 per gallon. Brent crude, used to price global oils, was up 55 cents, or 1.1 percent, at $52.20 per barrel in London.

At first, some traders were quick to blame a so-called fat finger trade or computer program gone awry, but then the pound and other currencies followed through and traded lower against the dollar. "We may be looking at a higher volatility backdrop with a trending lower market for the next couple of months".

MSCI's gauge of stocks across the globe fell 1.2 percent, while European shares ended down 1.4 percent. Brent crude, used to price worldwide oils, gained 56 cents, or 1.1 percent, to close at $52.21 per barrel in London. The FTSE 100 index of leading British shares dipped 0.2 percent.

The Australian market has pulled back from the worst of its falls earlier in the day, as investors take some solace from strong employment numbers.

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