European and Asian stocks slid yesterday on fears that a growing crisis surrounding US President Donald Trump could lead to his impeachment and shatter any chances of his economy-boosting agenda being implemented.
However US stocks recovered from Wednesday’s sharp selloff in morning trading.
Meanwhile the dollar recovered from a six-month low versus the euro, and clawed back ground against the yen, but not against the pound which was boosted by strong British retail sales.
“European equities are now fully entangled in the Trump-related sell-off. Yesterday the US market bore the brunt of the move but now it has gone global,” said David Madden, analyst at traders CMC Markets UK.
“Trump Dump!!,” tweeted Mati Greenspan, Senior Markets analyst at eToro.
Across Europe, London’s FTSE 100 fell 0.9% to close at 7,436.42; Frankfurt’s DAX 30 was DOWN 0.3% at 12,590.06, while Paris’ CAC 40 lost 0.5% at 5,289.73.
On Wall Street, the Dow was up 0.3% in late morning trading.
“While it actually managed to crawl back across the 20,600 mark after the bell, the Dow Jones still finds itself at its worst price in roughly a month, effectively shedding all of the growth it saw off the back of — or, more accurately, the anticipation of — Trump’s tax plans,” said Spreadex analyst Connor Campbell.
Analyst Chris Beauchamp at online trading firm IG said a US “bounceback was eminently predictable, especially since there have been no further developments in Trumpland. “The rally is small, and in no way really changes the bearish picture that was created yesterday — once options expire and the weekend is out of the way there is a high probability that the selling will resume.”
Global equities had already slumped on Wednesday, with the Dow losing 1.8% and Frankfurt shedding 1.4%, while Tokyo followed suit earlier yesterday with a loss of 1.3%.
Investors tracked the heaviest losses in New York since Trump was elected, following claims by recently fired FBI boss James Comey that the president pressed him to drop a probe into ex-national security advisor Michael Flynn’s links to Moscow.
That came a day after it was reported Trump had divulged classified information to Russia’s foreign minister, fanning further allegations about his own ties to the country’s leaders.
While the tycoon says he will be exonerated by a newly appointed special prosecutor who will look into the claims, analysts said the uncertainty is rocking markets globally.
There is a growing fear that Trump’s plans for tax cuts, big spending and red-tape slashing — which had fuelled a global equities and dollar rally following his November election win — will be thrown off course.
“It’s all about President Trump,” on markets, said Greg McKenna, chief market strategist at AxiTrader.
“Impeaching Donald Trump was a pipe dream for the Democrats but extremely unlikely to most other observers until a few days ago,” he added. “As it drags on, it hurts sentiment and recently often threatens the administration’s agenda — especially around tax and infrastructure.”
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