Stocks around the world fell
Monday, putting the Dow Jones Industrial Average on track for its longest
losing streak since 2011 as doubts about the Trump administration’s ability to
push through on campaign promises percolated through global markets.
The Dow Jones Industrial Average
declined 166 points, or 0.8%, to 20430, which would mark its eighth consecutive
day of declines. The S&P 500 dropped 0.9%, and the Nasdaq Composite fell
1%.
Government bonds, gold, and the
yen found favor, while the WSJ Dollar Index was down 0.6%—around November
levels—as investors continued to question expectations for business-friendly
policies that helped propel stocks to record highs earlier this year.
On Friday, House Republican
leaders ultimately abandoned their bill on a health-care plan amid a lack of
support, leaving investors fretting about the likely success and party support
for other complex legislative efforts, including a tax overhaul and
infrastructure spending.
“There is some real concern about
whether [President Donald Trump] is going to be able to get these policies
through,” said Dianne Lob, managing director for equities at AB. “I think the
theme for the year will be uncertainty.”
The move to pull the bill from a
vote came shortly before U.S. markets closed Friday, leaving little time to
react that day, but Wall Street still posted its steepest weekly decline in
months as investors headed toward the end of an otherwise buoyant first
quarter.
On Monday, the CBOE Volatility
Index, known as Wall Street’s “fear gauge”, hovered around its highest level
this year. Banks, miners, industrials, and oil companies—among the best
performers after the election—led losses in Europe, Asia and in U.S. premarket
trading, tracking a decline in government bond yields and commodity prices.
The Stoxx Europe 600 was down
0.8%, while London’s FTSE 100 fell 0.9% and Germany’s DAX fell 1% as a weaker
dollar also put pressure on shares of exporters. The British pound was last up
1.1% at $1.2606, while the euro was up 0.9% at $1.0892, around its highest
since December, as Germany’s Ifo business sentiment index hit its highest since
July 2011.
Short positions on the euro more
than halved last week to their lowest level since 2014, according to Rabobank
analysis of CFTC data.
The dollar had initially rallied
after Mr. Trump’s election on the expectation that pro-growth policies,
particularly tax cuts and deregulation of the financial sector, would boost the
economy and prompt the Federal Reserve to raise interest rates faster than
previously anticipated.
Those trades have been fading in
recent weeks however, with the dollar down more than 3% so far this year, and
the Mexican peso, which initially fell sharply on Mr. Trump’s election, up over
10%.
“The Trump-related euphoria has
now been almost completely priced out of the currency market,” said Vasileios
Gkionakis, currency strategist at UniCredit Research.
As investors returned to assets
perceived as safer, yields on 10-year Treasury notes fell to 2.358% from 2.396%
on Friday, while their German counterparts fell to 0.382% from 0.429%. Yields
move inversely to prices.
Commodity prices declined as
investors shed a host of so-called risk assets. Oil, which had started the day
higher, turned modestly lower despite the dollar’s decline. Brent crude oil
dropped 0.7% to $50.55 a barrel.
Base metals fell across the
board, with copper futures down 1.8% at $5,708 a ton. Metals prices also faced
pressure following curbs on financing in China’s housing sector, with iron-ore
futures down sharply on the Dalian Commodity Exchange.
Gold, which tends to outperform
in times of market stress, climbed 0.8% to $1,258.30 an ounce to around a
one-month high, while the dollar fell 1% against the yen to ¥110.1840.
“Markets are questioning the high
expectations built over the past few months,” said Jeremy Gatto, investment
manager at Unigestion. “[Mr. Trump] did promise a phenomenal tax reform
package, and the market would be disappointed if we got something smaller than
expected or nothing at all.”
Still, he said, he remains quite
positive on equity markets for now, citing a strengthening global economy and a
lack of alternatives to stocks.
Earlier, Japan’s Nikkei Stock
Average dropped 1.4% to its lowest levels since early February as the yen
strengthened. Infrastructure stocks, which rose in anticipation of a Trump-driven
increase in spending, were among Monday’s largest decliners in Japan, while
shares of insurers who invest heavily in government bonds also came under
pressure.
Most other stock markets in Asia
logged modest declines, with indexes in Hong Kong down 0.7% and shares in
Shanghai and Australia down 0.1%.
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