Published: Thu, May 18, 2017
Markets | By Lucia Cruz

Stocks, dollar sink as investors rethink 'Trump trade'

Stocks, dollar sink as investors rethink 'Trump trade'

The dollar index, which tracks the US currency against six peers and had scaled a 14-year peak of 103.82 .DXY on January 3, fell 0.6 percent to its lowest level since November 9, surrendering all of its "Trump bump" gains. The U.S. currency now sits at its lowest level since the day of Trump's shock win, a retracement some blame on perceptions his legislative agenda faces deeper challenges.

The Dow Jones Industrial Average was down 234.47 points, or 1.12 per cent, at 20,745.28, the S&P 500 was down 24.18 points, or 1.01 per cent, at 2,376.49 and the Nasdaq Composite index was down 83.65 points, or 1.36 per cent, at 6,086.22.

Brokers woke up to news that the White House has had to deny reports that President Donald Trump had asked former Federal Bureau of Investigation director James Comey to drop an investigation into former national security adviser Michael Flynn's alleged links to Russian Federation just before Mr Trump sacked Mr Comey. The S&P 500 bank sub-sector was down 4.5 percent while the broader financial sector sank 3.4 percent, led by a 6.2 percent decline in Bank of America stocks and a 4 percent drop for JPMorgan.

On equities markets Tokyo ended down 0.5 percent as the stronger yen hit exporters, while Hong Kong gave up 0.2 percent by the finish and Shanghai closed 0.3 percent lower.

It has gained almost 9 percent over the last week though some analysts were skeptical about the durability of the rally despite the proposed supply curbs.

"Macron and Merkel seemed more aligned than I expected, with Merkel even saying she wouldn't exclude treaty changes, which the market welcomed", Florian Hense, a senior economist at Berenberg, said. Though the White House has denied the allegation, there's mounting unease in markets over the developments in the US government.

Oil prices strengthened on Wednesday ahead of USA crude inventory data that could give investors a clue as to whether an OPEC-led output cut is making progress in reducing a persistent global supply overhang. The Dow Jones industrial average fell 372 points, and both the Dow and S&P 500 suffered their worst percentage drops since September 9. Even so, US policymakers "are in the mindset to raise as long as the markets are prepared for it", he said.

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The dollar index fell 0.77 percent, with the euro up 1.06 percent to $1.1089. The dollar also fell by almost 2 percent against the yen.

The dollar =USD was steady at 98.87 against a trade-weighted basket of its peers after falling more than 1 percent in the last three sessions. The Shanghai Composite Index edged 0.2 percent lower to 3,104.44.

The euro held firm at $1.1086, having hit a six-month high of $1.10975 on Tuesday, as it also drew support from solid economic data in the euro zone.

Benchmark 10-year notes gained a full point in price to yield 2.22 percent, the lowest since April 21, and down from 2.33 percent late on Tuesday.

A risk-on undertone meant meagre gains for gold, with the precious metal changing hands at $1,233 per ounce.

US crude fell 0.49 percent to $48.61 per barrel and Brent was last at $51.62, down 0.39 percent on the day.

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