Markets retreat as doubts about Trump’s growth agenda resurface - 22.3.2017

US stocks record worst decline in five months

US stock indices fell on Tuesday snapping the 109-day streak without a 1% decline. The dollar weakened: the live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, closed 0.7% lower at 99.685. Dow Jones industrial average closed 1.1% lower at 20668.01. The S&P 500 lost 1.2%, the worst drop since September, settling at 2344.02. The Nasdaq index fell 1.8% to 5793.83.

Investor confidence was undermined by slow progress of Trump administration in developing tax reform and infrastructure spending programs as Republican lawmakers, opposing the health bill supported by Trump and meant to dismantle the Affordable Care Act, said they will vote against the bill on Thursday since it does not go far enough as it will modify but not eliminate Obamacare. Trump warned Republican lawmakers that if the healthcare bill fails to pass, it would cause "political problems”. Treasury yields fell, pulling down financial stocks. Financial sector fell 2.9%, shares of Bank of America dropped 5.8%. Economic data showed the US current-account deficit fell 3.1% to $112.4 billion in the fourth quarter. Today at 12:00 CET Mortgage Applications will be released in America. At 14:00 CET January House Price Index will be published, the tentative outlook is neutral for dollar. At 14:30 CET February Existing Home Sales will be released, the outlook is negative.

SP 500

European stocks extend losses

European stocks closed lower on Tuesday with French stocks erasing early gains after polls showed center-right candidate Emmanuel Macron as the winner of the first presidential debate ahead of this spring’s elections. Both the euro and British Pound strengthened against the dollar with euro hitting six-week high. The Stoxx Europe 600 fell 0.5%, while Germany’s DAX 30 underperformed dropping 0.8% to 11962.13. France’s CAC 40 slipped 0.2% and UK’s FTSE 100 ended down 0.7% at 7378.34.

The euro rallied after a poll showed 29% of viewers who watched Monday’s presidential debate thought Macron was the most convincing candidate to become the next president. Conservative Francois Fillon’s approval was 20%, and far-right National Front party leader Marine Le Pen was favored by 19% of viewers. Le Pen has promised to hold a referendum on European Union membership if she wins, which is a major risk weighing on euro. Today at 10:00 CET euro-zone Current Account Balance for January will be released. The tentative outlook is negative for euro.

Asian markets track Wall Street losses

Asian stock indices are lower today as doubts about Trump’s ability to deliver on his promises to lower taxes and boost infrastructure spending set a risk off mood. Nikkei fell 2% to more than 3-week low 19041.38 as yen rose to a four-month high against the dollar. Financials led the decliners as investors shrugged off data showing exports grew the most in more than two years in February. Chinese stocks are falling with Shanghai Composite Index 0.5% lower while Hong Kong’s Hang Seng Index is down 1.3%. Australia’s All Ordinaries Index is down 1.5% with the Australian dollar edging lower against the dollar.

Oil prices down ahead of inventory data

Oil futures prices are edging lower today after the American Petroleum Institute report US stockpiles rose 4.5 million barrels to 533.6 million barrels last week. Traders are concerned higher US shale oil output is countering the output cuts by the Organization of the Petroleum Exporting Countries. May Brent crude contract closed 1.3% lower at $50.96 a barrel on London’s ICE Futures exchange on Tuesday. Today at 16:30 CET the Energy Information Administration will release US Crude Oil Inventories, a 2.8 million barrels build is expected.