Wall Street rebounds from big sell-off but uncertainty over Trump lingers

PUBLISHED : Friday, 19 May, 2017, 6:40am
UPDATED : Friday, 19 May, 2017, 6:45am

Wall Street rebounded on Thursday from its biggest sell-off in more than eight months, helped by strong US economic data, but uncertainty over US President Donald Trump’s agenda kept an index of global equity markets near a three-week low.

The US dollar reversed early losses against a basket of major currencies after stronger-than-expected US economic data put the focus back on a widely anticipated increase in interest rates by the Federal Reserve.

Still, reports that Trump had tried to intervene in an investigation of alleged Russian meddling in last year’s US presidential election, and that his aides had numerous undisclosed contacts with Russian officials, kept markets concerned over his ability to implement his economic agenda.

Adding to market jitters across the Americas, Brazilian stocks triggered a 30-minute halt to trading after the benchmark Bovespa index fell 10 per cent following a report that President Michel Temer gave his blessing to an attempt to pay to silence a potential witness in the country’s biggest-ever graft probe. The iShares MSCI Brazil ETF tumbled 16 per cent.

Global stocks reel as Trump’s political woes spook investors

MSCI’s all-country world equity index was down 0.31 per cent after dipping to its lowest since April 25 earlier in the day. The index found some support on Wall Street. US stocks recovered ground after a near 2 per cent sell-off on Wednesday for the S&P 500, as upbeat economic data emboldened investors to return to the market.

“We could be just shaking off the jitters here. Yesterday, investors were really worried,” said Janna Sampson, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.

Investors were likely relieved, she said, by Wednesday night’s appointment of former FBI chief Robert Mueller to investigate alleged Russian interference in the election and possible collusion between Trump’s campaign and Moscow.

“Whatever the (investigation) result, people feel they might have confidence it’s an accurate, unbiased result,” she said.

Earlier in the day, the Philadelphia Federal Reserve said its business activity index rose in May after declining for two months. Weekly unemployment data also pointed to strength in the labour market.

The Dow Jones Industrial Average rose 56.09 points, or 0.27 per cent, to end at 20,663.02, the S&P 500 gained 8.69 points, or 0.37 per cent, to finish at 2,365.72 and the Nasdaq Composite added 43.89 points, or 0.73 per cent, to close at 6,055.13.

The pan-European FTSEurofirst 300 index closed down 0.89 per cent at 7,436.42, ending off lows.

US Treasury yields rose from one-month lows as stocks recovered from Wednesday’s drop, reducing demand for safe-haven bonds. The 10-year note was down 4/32 in price to yield 2.229 per cent, up from 2.216 per cent late on Wednesday.

Spot gold dropped 1 per cent to US$1,247.78 an ounce.

The US dollar reversed early losses against a basket of major currencies, getting a boost from the better-than-expected US data.

“The readings on jobless claims and the Philly Fed index back expectations for faster (second-quarter) growth and a Fed rate hike next month,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

The dollar index was up 0.27 per cent, with the euro down 0.45 per cent to US$1.1108.

Oil prices settled higher as key producing countries suggested they would extend supply cuts to reduce an ongoing global crude glut. Benchmark Brent crude futures ended the session 30 cents higher at US$52.51 a barrel while US crude futures settled up 28 cents at US$49.35.