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Trump legal woes, trade talks cause nerves

Stocks faltered and bonds rose yesterday as United States President Donald Trump’s political position was threatened by two former advisers’ legal woes, while the US dollar headed for its sixth straight day of losses.

Investors had a lot to digest with the conviction of Mr Trump’s former campaign chairman on eight counts of financial wrongdoing and a guilty plea by his former personal lawyer in separate cases.

While the immediate market reaction was not dramatic, the developments present further uncertainty over Mr Trump’s leadership for investors to navigate. US bond yields dropped as investors sought safety in Treasuries. They were trading at 2.8207 per cent, compared with Tuesday’s close of 2.844 per cent.

MSCI’s all-country world stock index was unmoved by the uncertainty, rising 0.3 per cent after the S&P 500 hit a record intraday high of 2,873.23 points, topping the 2,872.87 set on January 26.

The index was poised for the longest-running bull market in its history. Its relentless rise highlights the divergence in fortunes between US stocks – turbo-charged by tax cuts and share buybacks – and the rest of the world.

Year-on-year earnings growth in the US is expected to be around 24 per cent this year while Europe is forecast to deliver around 9 per cent.

European shares edged down 0.1 per cent, trading lower as the market awaited US-China trade talks set to resume under the cloud of Mr Trump’s prediction that they would make no real progress.

The US dollar gave up early gains, set for its sixth straight day of selling after Mr Trump’s criticism of the Federal Reserve’s rate rises in a Reuters interview.

The dollar index fell 0.3 per cent to 94.98, while the euro hit a two-week high against the greenback, at $1.1605.

Emerging-market stocks climbed 0.4 per cent, leaving 13-month lows further behind as the dollar’s losses helped ease pressure on the index which entered bear territory last week, nearly $1 trillion market cap down from its Jan peak.

Meanwhile, German 10-year Bunds bucked the trend set by Treasuries.

Yields on the euro zone benchmark bond hit their highest since August 10, tightening the gap with the United States as the euro zone economy showed signs of improvement.

In commodity markets, US crude rose 1.8 per cent to $67.04 a barrel and Brent crude climbed 1.8 per cent to $73.94 per barrel on an industry report showing a drop in US crude inventories.

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