Trump rally in stocks stall as doubts increase over his agenda

PUBLISHED : Wednesday, 22 March, 2017, 7:38am
UPDATED : Wednesday, 22 March, 2017, 7:38am

US and European shares tumbled on Tuesday on concerns that higher interest rates and pro-growth US policies were on hold, boosting safe-haven Treasuries and gold and sending the dollar to a nearly four-month low against the yen.

The US S&P 500 financial sector fell as much as 3.1 per cent and posted its biggest daily plunge in about nine months, contributing to the worst daily performance for the benchmark since October 11.

Analysts attributed the selling to reduced confidence that US President Donald Trump’s pro-growth policies, including financial deregulation, would occur soon, and to concerns of a dovish Federal Reserve. The Fed stuck to its outlook for two more hikes this year last week, instead of the three expected by many market participants.

Investors also saw the Trump administration’s struggles to push through the health care legislation overhaul as a sign he may also face setbacks delivering promised corporate tax cuts.

The tech-heavy US Nasdaq Composite fell as much as 1.9 per cent after hitting a record intraday high earlier on the back of a rise in Apple shares, which briefly touched a record US$142.80 a share before falling 1.15 per cent to close at $139.84. The Nasdaq Composite ended down 107.70 points, or 1.83 per cent, at 5,793.83.

The Dow Jones Industrial Average ended down 237.85 points, or 1.14 per cent, at 20,668.01. The S&P 500 closed down 29.45 points, or 1.24 per cent, at 2,344.02.

“The market is starting to get a little fed up with the lack of progress in health care because everything else is being put on the back burner,” said R.J. Grant, head of trading at Keefe, Bruyette & Woods in New York.

MSCI’s all-country world equity index was last down 3.01 points, or 0.67 per cent, at 448.05.

Europe’s broad FTSEurofirst 300 stock index also fell after hitting a 15-month high, to close down 0.50 per cent at 1,480.99.

Safe-haven gold, the yen and US Treasuries all benefited. The dollar hit 111.55 yen, its lowest since November 28, while gold hit a more than two-week high of US$1,247.60 an ounce and benchmark 10-year US Treasury note yields touched a nearly three-week low of 2.419 per cent.

The euro hit US$1.0819, its highest against the dollar since February 2. Centrist Emmanuel Macron cemented his position as front-runner in the first televised French presidential debate on Monday versus anti-European Union contender Marine Le Pen.

“It’s probably going to take some sort of meaningful change in expectations around monetary or fiscal policy to revive the dollar and set it back on a strengthening trend,” said Erik Nelson, a currency analyst at Wells Fargo in New York.

U.S. crude oil prices hit a one-week low of US$47.23 a barrel as concerns about new supplies overshadowed the latest talk by OPEC that it was looking to extend output cuts beyond June.

Brent crude settled down 66 cents, or 1.28 per cent, at US$50.96 a barrel. US crude settled down 88 cents, or 1.82 per cent, at $47.34, which marked the lowest settlement price since November.