Global stocks fall after US rout, US dollar gains
Shares across Europe extended declines after the S&P 500 Index plummeted by the most since September, following reports that US President Donald Trump asked FBI director James Comey in February to halt an investigation. Comey was fired last week. Other assets showed more calm after yesterday’s sharp moves, even as a political crisis in Brazil added to the chaos in Washington. US equity futures stabilised and the dollar benefited from weakness in emerging-market currencies. Treasury yields were little changed.
As the turmoil surrounding Trump threatens to derail the policy agenda that helped push global equities to records as recently as Tuesday, a gauge of US stock volatility surged the most since the UK voted to leave the European Union last June. Many of the trades sparked by the president’s November election have now reversed, with the dollar all but erasing its post-election rally.
“The market will revert to much higher volatility and this could be the start of it,” said Richard Haworth, chief investment officer of 36 South Capital Advisors, a London-based hedge fund which bets on rising price swings. “The sharp move this week reflects how short volatility the market was — how complacent.”
The dollar saw some respite, however, after former FBI Director Robert Mueller was appointed as special counsel to investigate Russian efforts to influence the 2016 election.
What’s ahead for investors:
Federal Reserve Bank of Cleveland President Loretta Mester speaks on the economy and monetary policy in the US Odds of a June Fed rate hike settled around 60 per cent, while full pricing of a next hike shifted to November from September, per Fed-dated OIS rates. US Treasury Secretary Steven Mnuchin offers his first congressional testimony since taking office, appearing before the Senate Banking Committee on issues ranging from the rollback of Dodd-Frank financial regulations to his decision not to name China a currency manipulator. Yesterday’s initial jobless claims report coincides with the May employment survey period and may garner extra attention. Consensus is for 240,000 new claims in the week ended May 13 versus 236,000 the prior week. And ECB minutes of the April 27 meeting, after which Mario Draghi pointed to a broad-based economic upswing, will give more clues on its internal debate about tapering.
Here are the major moves in the markets:
The MSCI Asia Pacific Index slid 0.8 per cent, the most since April 6. Japan’s Topix slumped 1.3 per cent while a volatility measure on the Nikkei 225 Stock Average jumped to the highest this month. The Hang Seng China Enterprises Index of mainland shares traded in Hong Kong retreated 1.1 per cent.
The Stoxx Europe 600 Index declined 0.5 per cent as of 9.58am in London, after tumbling 1.2 per cent yesterday for the biggest drop since September. Futures on the S&P 500 rose 0.1 per cent after the benchmark gauge fell 1.8 per cent yesterday, its worst day since September 9. A Japan-traded ETF tracking Brazil’s Ibovespa Index tumbled 7.5 per cent, the most since November, as political crisis returned to the country after last year’s impeachment process.
The Bloomberg Dollar Spot Index increased 0.3 per cent, after dropping 0.5 per cent yesterday to the lowest level since November 8. South Africa’s rand led declines among emerging-market currencies, slumping 1.8 per cent. Mexico’s peso weakened 1.6 per cent. The euro fell 0.3 per cent to US$1.1131 (RM4.83), after four straight days of gains. The British pound jumped 0.4 per cent to US$1.3023 after data showed retail sales rose more than expected in April.
The yield on 10-year Treasuries steadied after dropping 10 basis points yesterday to 2.22 per cent, the lowest since April 19. Benchmark yields in France and Germany fell three basis points. Bonds of state-controlled energy company Petroleo Brasileiro SA dropped by the most in six months amid a political crisis in Brazil. The company’s €800 million (RM3.8 billion) of notes due in January 2025 led the slump, falling 4.5 cents on the euro to 102 cents, the biggest decline since November.
Gold slipped 0.3 per cent to US$1,257.21 an ounce following a 2 per cent surge in the previous session, the biggest one-day rally since the aftermath of the Brexit vote. Nickel led a retreat in industrial metals, dropping 1.4 per cent to US$9,090 a tonne as political turmoil in the US threatened the outlook for the world’s biggest economy. West Texas crude dropped 0.3 per cent to US$48.92 a barrel, after jumping 0.8 per cent in the previous session. Oil reached the highest close since April 28 as US supplies fell for a sixth week. — Bloomberg
Source: The Malay Mail Online