Trump honeymoon over as global equities markets plunge in unison

By Trevor Hoey. Published at Jan 31, 2017, in Features

President Trump’s honeymoon period could be the shortest in US political history if the unravelling of last week’s stock market gains are an indication.

There was more to the fall than just the Dow being off more than 200 points at one stage, it was the fact that the falls could be traced back to sectors and stocks which stand to be potentially hurt by policy changes by the new administration.

For example, Mexico is one of the largest importers of US grains and China is the largest importer of US soybeans. Both these soft commodities have fallen substantially in recent days and this trend accelerated overnight.

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Rather than embracing the unknown US investors now appear to be examining the potential cause-and-effect relationships that can be drawn between Trump’s policies and certain industries and sectors.

While the decline in the Dow was also impacted by the falling oil prices and negative commentary regarding rig counts, the fact that the volatility index (VIX) spiked 17% suggested there was more to the fall than concerns regarding one commodity.

After falling from the previous day’s close of 20,093 points to an intraday low of 19,870 points, the Dow pushed up towards 19,920 points as markets drew to a close.

This represented a fall of 0.8%, and the NASDAQ was also down more than 1% with sharp declines experienced by Intel, Microsoft, Cisco Systems and IBM. Silicon Valley is home to some of the smartest minds that are headhunted by the biggest global tech companies from overseas destinations, a trend that could be railroaded by the Trump administration.

Consequently, this development which also affected stocks such as Google and Facebook indicates that investors are starting to join the dots and the days of broad-based euphoria that pushed both the Dow and the NASDAQ up to record levels may be over.

Markets in Europe were also negatively impacted by concerns over Trump’s immigration changes with the tourism and travel sector one of the hardest hit.

The FTSE 100, Dax and Paris CAC 40 were all down circa 1%.

On the commodities front oil was down by approximately 1%, while gold rallied circa 0.6%, briefly touching US$1200 per ounce in morning trading before pulling back to close just shy of that mark.

Base metals were mixed with copper down slightly, while nickel, zinc and lead made good gains. Having spiked 2.7 US cents per pound overnight, lead is just shy of the US$1.10 per pound mark, a level it hasn’t traded at for approximately four years.

The Australian dollar was relatively unmoved at US$0.755.

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