Trump travel curbs slam stocks, hit dollar vs yen
Major world equity markets fell on Monday and the dollar slipped against the safe-haven yen after new US immigration curbs stirred concerns about the impact of US President Donald Trump’s policies on global trade and the economy.
Stocks posted their worse day so far this year on Wall Street after Trump’s executive order on Friday to bar Syrian refugees and suspend travel to the United States from seven countries, which put the spotlight back on his protectionist bent.
The dollar fell against the yen as investors sought the traditional security of the Japanese currency, and gold edged higher amid heightened political uncertainty. Gold futures rose 0.4 per cent to settle at US$1,193.20 an ounce, while the dollar slipped 1.18 per cent to 113.70 yen.
The negative reaction to Trump’s orders cooled a rally that had lifted US equities to a series of record highs following the president’s election in November, encouraged by promises of tax cuts and simpler regulations. However, the potential risk from some of Trump’s policies have dampened enthusiasm.
The CBOE Volatility index, known as Wall Street’s “fear gauge,” rose 1.32 points to 11.90 from multi-year lows.
Investor enthusiasm over expectations of a pro-business Trump agenda, especially tax and regulatory reforms, had spurred the rally, said Rick Meckler, president of hedge fund LibertyView Capital Management LLC in Jersey City, New Jersey.
“These two things were most important,” Meckler said. “We seem totally caught up now in immigration reform and travel restrictions. Those are not things the business community is necessarily excited about.”
Peter Cardillo, chief market economist at First Standard Financial in New York, said that investors had focused on Trump’s pro-growth of proposals and ignored anything detrimental to economic activity, such as protectionism.
MSCI’s all-country world stock index fell 0.62 per cent, while the FTSEurofirst 300 Index of leading pan-European stocks closed down 1.06 per cent.
Country indexes for Germany, France, Italy and Spain all fell by more than 1 per cent.
Shares on Wall Street also fell about 1 per cent but pared some of their losses late in the session.
The Dow Jones Industrial Average closed down 122.65 points, or 0.61 per cent, to 19,971.13. The S&P 500 lost 13.79 points, or 0.60 per cent, to 2,280.9 and the Nasdaq Composite slid 47.07 points, or 0.83 per cent, to 5,613.71.
Earlier in Asia, Japan’s Nikkei fell 0.5 per cent and Australian shares slid 0.9 per cent.
The euro fell to an 11-day low against the dollar after the release of German inflation data that was slightly weaker than expected. But the euro steadied as investors reassessed consumer prices hitting the highest in three-and-a-half years. The euro was unchanged at $1.0694.
US Treasuries were little changed ahead of policy meetings of the US Federal Reserve on Tuesday and Wednesday and a heavy week of data that culminates with Friday’s jobs report for January.
The Benchmark 10-year US Treasury note was down 4/32 in price to yield 2.4956 per cent.
Germany’s 10-year yields dipped as low as 0.436 per cent on the inflation number.
Oil prices fell as news of another weekly increase in US drilling activity spread concern over rising output, just as many of the world’s oil producers attempt to comply with a deal to pump less to try to prop up prices.
The number of active US oil rigs rose to the highest since November 2015 last week, according to Baker Hughes data, showing drillers are taking advantage of oil prices above US$50 a barrel.
Global benchmark Brent crude oil prices were down 23 cents at US$55.29 a barrel, while US crude futures settled down 54 cents at US$52.63.