World stocks slide on Trump’s woes and fallout from Barcelona terrorist attack

PUBLISHED : Friday, 18 August, 2017, 7:46am
UPDATED : Friday, 18 August, 2017, 7:46am

World equity markets and US bond yields fell while gold rose on Thursday as investors favoured safe-haven investments amid growing scepticism US President Donald Trump, embroiled in controversy, would achieve his economic agenda.

Adding to investor concerns was news that a van had slammed into crowds in the Spanish city of Barcelona, killing 13 people, in an incident police labelled a terrorist attack. The US dollar trading was volatile and US Treasury yields fell on worries Trump will be unable to deliver on campaign promises such as tax reform, even as the White House knocked down speculation that Gary Cohn, director of the National Economic Council, would resign.

A crisis deepened over Trump’s response to clashes last weekend in Charlottesville, Virginia, spurred by white supremacists protesting the removal of a Confederate statue.

After Trump blamed counter-protesters as much as the white nationalists for clashes that left one woman dead, an exodus of business executives from his advisory councils on Wednesday fuelled speculation other officials, such as Cohn, would leave.

Trump on Thursday again decried the removal of pro-slavery Civil War Confederacy monuments, which have fuelled US racial tensions.

Rather than a single catalyst, a range of worries prompted investors to take profits, including the tense US relationship with North Korea, the Barcelona attack and domestic turmoil. But some investors said the pullback would likely be temporary.

“The stock market has a great tendency to look at geopolitical or political events, have a small pullback and then just shrug its shoulders,” said Burns McKinney, chief investment officer in the Dallas office of Allianz Global Investors.

“Normally it takes a day or two to digest such events, but what the market cares about is corporate earnings,” which have been growing at double digits the first and second quarter, McKinney noted.

13 killed, two arrested in Barcelona terrorist attack; one Hongkonger reported injured so far

The Dow Jones Industrial Average fell 274.14 points, or 1.24 per cent, to 21,750.73, the S&P 500 lost 38.1 points, or 1.54 per cent, to 2,430.01 and the Nasdaq Composite dropped 123.20 points, or 1.94 per cent, to 6,221.91.

It was only the fourth session this year in which the S&P lost more than 1 per cent in a day. The last drop of more than 1 per cent came on August 10.

The pan-European FTSEurofirst 300 index lost 0.59 per cent and MSCI’s gauge of stocks across the globe shed 0.57 per cent.

The dollar was boosted by weakness in the euro after European Central Bank meeting records showed caution about removing monetary stimulus too soon, but the US currency was volatile as rumours about Cohn swirled.

The dollar index rose 0.2 per cent, with the euro down 0.24 per cent to US$1.174, after hitting a three-week low.

The ECB news came a day after Federal Reserve meeting minutes showed some policymakers cautioning against rate increases while US inflation remained weak.

US Treasury yields fell as investors, unnerved by the deadly attack in Barcelona and Washington turmoil, favoured safe, low-yielding bonds over stocks and other risky assets.

Benchmark 10-year notes last rose 11/32 in price to yield 2.1888 per cent, compared with 2.225 per cent late on Wednesday.

“There’s a lot of uncertainties. That’s why we haven’t retraced back to where we were,” said Gennadiy Goldberg, interest rate strategist at TD Securities in New York.

Oil prices rose on Thursday as investors focused on US oil stockpile declines after an industry report suggested inventories at the Cushing, Oklahoma hub were declining.

US crude rose 0.49 per cent to US$47.01 per barrel and Brent was last at US$50.89, up 1.23 per cent on the day. A safe-haven commodity, spot gold added 0.4 per cent to US$1,287.45 an ounce.