Tuesday 21 November 2017

Deepening White House turmoil roils markets

Specialist trader Jay Woods works at his post on the floor of the New York Stock Exchange
Specialist trader Jay Woods works at his post on the floor of the New York Stock Exchange

The turmoil engulfing US President Donald Trump's administration spilled into financial markets on Wednesday.

US stocks fell the most since March, measures of volatility spiked higher and Treasuries rallied with gold.

The Dow Jones Industrial Average lost more than 200 points, shattering the calm that gripped markets in the past month as the crisis threatened to derail the policy agenda that helped push equities to records as recently as Monday.

The dollar dropped a sixth day, while Treasury 10-year yields tumbled to 2.25pc. Emerging-market equities halted a seven-day rally.

Crude rose after US inventory data.

"If he's preoccupied defending himself and if it goes a lot further, then any hope of his legislative agenda coming to the fore is going to be reduced," John Stopford, head of fixed-income at Investec Asset Management, said. "Clearly at the margin it's a negative. At the moment there's a classic environment for (bond) yields to rally a bit further and for the dollar to sell off."

The dollar slipped to its lowest level since the day of Trump's shock win, a retracement some blame on perceptions his legislative agenda - including tax cuts - faces deeper challenges.

The US S&P 500 Index fell 1pc to 2,376.29 in early trading in New York, coming off the all-time high hit on Tuesday and bank shares led the retreat. In Europe, the Stoxx Europe 600 Index fell 1pc, after ending little changed in the previous session. The Iseq in Dublin was down 1.33pc, slipping under 7,000.

Reports that Mr Trump asked then-FBI Director James Comey to end a probe into his former national security adviser have raised questions over whether obstruction of justice charges could be laid against the president.

This follows a week of turmoil at the White House after Mr Trump fired Mr Comey and then discussed sensitive national security information about Islamic State with Russian Foreign Minister Sergei Lavrov.

The dollar has now given up all the gains it made following Mr Trump's presidential election win in November, and a pull-back from record highs for world stocks underscores investor unease about this week's headlines.

"The Trump issue seems to come in waves, and now we have another wave," said Hans Peterson, global head of asset allocation, at SEB Investments. "I have been asked if he is going to be impeached. I think that is the type of discussion some (investors) are having," Peterson said.

Safe-haven gold hit a two-week high, climbing 0.6pc to $1,243.31 in a fifth straight days of rises.

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