The Trump storm strikes global stocks again

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LONDON (Reuters) – Swirling uncertainty over US President Donald Trump’s political future saw world stocks extend their steepest fall in more than six months yesterday, though there were signs of stabilisation elsewhere as the dollar and gold steadied.
Reports that Mr Trump had tried to intervene in an investigation into alleged Russian interference in last year’s US election and that his aides had numerous undisclosed contacts with Russian officials kept market tensions high.
Europe’s bourses dropped between 0.8 and 1.3 percent as the selling pressure built again and Wall Street was expected to open down as much as 0.5 percent, having suffered its biggest thumping in more than eight months on Wednesday.
Rabobank strategist Michael Every said the key question was whether markets would “calm down, or panic more”.
“The obvious point we’ve made before repeatedly is that Mr Trump now has much less political capital to spend in the Capitol, and that makes Trumpflation far less likely. Yet things seem to be rapidly moving beyond that point, opening up other scenarios,” he said.
Though stocks flashed warning lights again, the dollar seemed to be going for the “calm down” option.
It pulled out of a tailspin that had taken it to its lowest level in six months against other top currencies including the euro and the yen, though it remained wobbly.
A mini-recovery in Asia as Japan posted its best economic performance in a year ran out of steam in Europe, and it was limping sideways at $1.1136 per euro and buying 110.97 Japanese yen by the time US traders got to their desks.
Switzerland’s safe-haven franc hit its highest since November’s US election and Britain’s Brexit-bruised pound broke through the $1.30 barrier for the first time since late September after reassuring retail sales figures.
There was more support for the euro too as one of the European Central Bank’s most influential policymakers, executive board member Benoit Coeure, said it should get on with paring back its stimulus once it is convinced inflation has recovered.
“Too much gradualism in monetary policy bears the risk of larger market adjustments when the decision is eventually taken,” Mr Coeure told Reuters in an interview in which he also said the bank’s bond-buying programme was “not set in stone”.
The political jitters coming out of the United States remained the dominant factor for traders, however.
The allegations surrounding Mr Trump have not only thrown doubt over the future of the pro-growth policies he promised, but have raised the possibility he could end up leaving the White House prematurely.
A small number of Mr Trump’s fellow Republicans called on Wednesday for an independent probe of possible collusion between his 2016 campaign team and Russia, and one even mentioned impeachment.

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