Trump makes markets nervous again

● Trump controversies rattle nerves
● Dollar index hits fresh six-month low
● S&P 500 futures slide, dragging down other equity benchmarks
● Yen, gold and Treasury prices rise as traders seek havens
● Oil relapses after strong rally

The dollar is sliding to six-month low and US equity futures are in retreat as investors fret that president Donald Trump’s ability to push through his mooted pro-growth policies is under threat.

Reports that Mr Trump sought to interfere in an FBI investigation is the latest controversy to ensnare the White House, damping global risk appetite and causing some investors to seek the perceived safety of government bonds, gold and the Japanese yen.

“Heightened political uncertainty is reinforcing the negative impact on the US dollar from the softening US economic data flow, supporting our view that the US dollar is likely to remain offered in the near-term,” says Derek Halpenny at MUFG.

The dollar index (DXY), which tracks the greenback against a basket of its peers, is down 0.2 per cent to 97.95, its weakest since mid November. The DXY rose to a 14-year high of 103.82 in the aftermath of Mr Trump’s election victory as investors made bets that his presidency could boost the world’s biggest economy and encourage the Federal Reserve to tighten monetary policy at a faster pace.

Similar reasoning — alongside improving corporate earnings — helped propel the US stock market to record levels, with the S&P 500 on Tuesday hitting an intraday high of 2,405.8. However, futures indicate the Wall Street equity barometer will slip 16 points to 2,384 when trading gets under way later in New York.

US government bonds remain a supposed haven, even when it is the US government that is the source of market angst. Consequently, the 10-year Treasury yield, which moves opposite to the bond price, is down three basis points to 2.30 per cent.

The Japanese yen is among the main currency beneficiaries of the dollar’s woes, strengthening 0.7 per cent to ¥112.35 per buck, its firmest level in nine days.

What to watch
The UK jobs market is in focus as campaigning in the country’s general election continues. The Office for National Statistics is set to publish unemployment and average earnings data for March at 09:30 BST.

Ahead of the numbers the pound is up 0.1 per cent to $1.2931 and 10-year gilt yields are little changed at 1.13 per cent.

Commodities
The latest rally in oil prices, which came after Russia and Saudi Arabia pledged to extend production cuts, has come to a halt.

Brent crude, the international benchmark, is down 0.5 per cent to $51.42 a barrel, while West Texas Intermediate, the main US contract, is down 0.5 per cent to $48.40 ahead of inventory data due later on Wednesday.

Gold is enjoying its haven status, weaker dollar and falling bond yields, climbing 0.6 per cent to $1,243 an ounce.

Additional reporting by Hudson Lockett in Hong Kong