Stocks, the dollar and US long-dated Treasury yields slipped yesterday as investors fretted that US President Donald Trump’s defeat over healthcare reform foreshadowed difficulties delivering other campaign promises, in particular fiscal stimulus.
Mr Trump’s failure to rally enough support from his own Republican party – which controls both houses of US Congress – to repeal and replace Obamacare spurred a rush to safe-haven assets such as gold, the Japanese yen and the Swiss franc.
MSCI’s all-country world equity index was down 0.16 as the fall in risk appetite dominated Asian and European stock markets.
The index was dragged down further after a lower open on Wall Street when main US stock indexes hit their lowest levels in six weeks.
The Dow Jones Industrial Average fell 66.4 points, or 0.32 per cent, to 20,530.32, the S&P 500 lost 5.56 points, or 0.24 per cent, to 2,338.42 and the Nasdaq Composite dropped 6.13 points, or 0.11 per cent, to 5,822.61.
European shares were hit by losses among miners and banks. Europe’s broad FTSEurofirst 300 index dropped 0.5 per cent at 1,477.12.
The US dollar fell to its lowest since November against a basket of currencies as investors lost confidence in prospects for a US fiscal spending boost under the Trump administration.
The dollar index had risen to a 14-year high near 104.00 in early January when expectations for inflation-boosting stimulus under the Trump presidency were at their peak. Yesterday, the index slipped below 99.0, its lowest since November 11, two days after the results of the presidential vote.
The weaker dollar helped boost gold. Spot gold was up 0.95 per cent at $1,255.70 an ounce, after hitting a one-month high of $1,261.03 an ounce, earlier in the session.
US long-dated Treasury yields fell to one-month lows, knocked by growing uncertainty about whether the Trump administration could deliver on its campaign promise to bolster the economy.
US 30-year bond prices rose 15/32, yielding 2.976 per cent. Earlier, yields slid to 2.96 per cent, their lowest since February 28.
“This is just follow-through from Friday. There is disappointment over the inability to pass the reform of Obamacare,” said Gennadiy Goldberg, interest rates strategist at TD Securities in New York.
“There was also some concern over the time line over tax reform.”
Meanwhile, oil fell further towards $50 a barrel, pressured by uncertainty over whether an Opec-led production cut would be extended beyond June in an effort to counter a glut of crude.
Brent crude was last down 14 cents, or 0.28 per cent, at $50.66 a barrel. US crude was down 33 cents, or 0.69 per cent, at $47.64 per barrel..