By Riva Gold and Kenan Machado
-- Stoxx Europe 600 sheds 1%, Nikkei off 1.3%
-- S&P 500 futures edge down 0.3%
-- British pound climbs to $1.3021
Global stocks extended losses Thursday as nervousness about the
Trump administration's ability to push through its political agenda
continued to ripple through financial markets.
Futures pointed to a 0.3% opening loss for the S&P 500 and a
0.4% loss for the Dow Jones Industrial Average after Wall Street's
biggest selloff since September interrupted a period of unusual
calm in markets.
Stocks in Asia ended lower for a second session, while the Stoxx
Europe 600 fell another 1% amid declines in banks, miners and auto
companies. London's export-heavy FTSE 100 index shed 1.3% as the
British pound climbed above $1.30 for the first time this year.
Recent political developments have put U.S. President Donald
Trump's administration on the defensive and investors world-wide
have been more worried about his ability to push through proposals
on tax cuts, deregulation and infrastructure spending.
"Everything happening in Washington is likely to if not derail,
at least delay what the market expectation has been about
significant tax reform and tax reduction," said David Lafferty,
chief market strategist at Natixis Global Asset Management.
News that former FBI Director Robert Mueller will serve as
special counsel to oversee a federal investigation into alleged
Russian interference in the 2016 presidential election did little
to calm investors.
As investors dialed back on risk, Brent crude oil fell 1.2% to
$51.60 a barrel on Thursday, while Asian equity markets were
broadly lower, echoing the selloff in the U.S. on Wednesday.
Japan's Nikkei Stock Average fell 1.3% as a global flight to
haven assets boosted the value of the yen, weighing on the
country's exporters, particularly in the auto sector. Japanese life
insurers, which are large holders of U.S. government bonds, were
hit by declines in Treasury yields.
Yields on 10-year U.S. Treasurys fell to around 2.200% Thursday
from 2.216%, following their biggest daily decline since the week
of the U.K. referendum in June.
"Two weeks ago, we were talking about policy, and now we're
talking about all of the political firestorm swirling around the
White House," said Brett Wander, CIO for fixed income at Charles
Schwab Investment Management.
The spread between the two-year and 10-year Treasury yields
closed at less than 1 percentage point for the first time since the
November election on Wednesday while the S&P 500 Financials
sector wiped out its gains for the year.
Declines in Japanese shares came despite economic data that
showed first-quarter gross domestic product expanded 2.2% from a
year earlier.
Still, many investors said longer term, the jitters in
Washington were unlikely to detail a buoyant global economy and
solid corporate earnings that had recently lifted stocks to record
highs.
"We've been suggesting clients should be looking for setbacks
like this as an opportunity to deploy funds in growth-related
assets rather than see it as the harbinger of another massive
setback," said Kevin Gardiner, global investment strategist at
Rothschild Wealth Management.
"The U.S. consumer has plenty of gas in the tank even without
tax cuts," he said, noting the economy was beginning to pick up
even ahead of the U.S. election in November.
Data Thursday showed the number of Americans applying for
first-time unemployment benefits fell last week for the third
consecutive time in a fresh sign of steady job creation.
Meanwhile, the first-quarter earnings season was the best in six
or seven years, with double-digit growth seen in all the main
regions, according to Emmanuel Cau, global equity strategist at
J.P. Morgan. Japan recorded the highest earnings-per-share growth,
followed by Europe and the U.S., the bank said.
"From a fundamental investor perspective, I'm not seeing
anything that shakes my view that the U.S. economy is ticking along
just fine," said James Athey, a manager at Aberdeen Asset
Management, which manages $385.2 billion in assets.
In corporate news, shares of Wal-Mart Stores climbed 2.1% in
premarket trading after the world's largest retailer reported
stronger quarterly sales.
Shares of Cisco Systems fell 7.2% after it said it would lay off
an additional 1,100 employees and forecast a drop in quarterly
revenue, while shares of Alibaba dropped 2.8% after the e-commerce
giant's profit fell short of expectations.
In currencies, the dollar showed signs of recovering Thursday
from its worst session since March, as analysts pointed to
safe-haven demand for the currency. The WSJ Dollar Index inched up
0.2%, with investors still pricing a roughly 55% chance of a rate
rise in June, according to CME Group data, down from around 79% on
Tuesday.
The British pound was up 0.4% at $1.3021 after data showed U.K.
retail sales rebounded in April from a steep quarterly decline in
the first three months of the year.
--Wiktor Szary, Sarah Chaney and Anne Steele contributed to this
article.
Write to Riva Gold at riva.gold@wsj.com and Kenan Machado at
kenan.machado@wsj.com
(END) Dow Jones Newswires
May 18, 2017 09:14 ET (13:14 GMT)
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