Stocks rally falters, dollar drops as Flynn quits

Sydney - A global rally that sent US benchmarks surging to a fresh round of records faltered, as equities from Japan to London slid and the dollar dropped after Donald Trump’s national security adviser resigned.

The dollar deepened losses against most major currencies and US stock futures slumped after Michael Flynn stepped down amid concerns over the White House national security adviser’s Russian contacts.

European stocks snapped a five-day winning streak. Japan’s Topix slipped as the yen strengthened and Toshiba Corporation tumbled, while shares in Hong Kong swung as investors weighed data on China’s producer prices.

The disarray in the Trump administration overshadowed optimism for an improving US economy under the president’s policies that sent the S&P 500 Index to an unprecedented high on Monday.

Flynn resigned amid deepening controversy over allegations of improper contact with Russian officials, disrupting the global strategic team of a president propelled to office largely on promises to protect the US against foreign terrorism.

"The news dampens slightly the expectations for a smooth implementation of various policies," said Minori Uchida, head of global market research at Bank of Tokyo-Mitsubishi UFJ. But he added the dollar selloff may be limited.

"Market expectations on Trump are about his economic policies, and while Flynn’s post is significant, it isn’t directly related," he said.

Inflation data from China failed to lift stocks in Shanghai and Hong Kong. China’s factory gate prices increased the most since 2011 last month, while consumer prices rose 2.5%.

That spurred concerns over monetary policy, as the People’s Bank of China has been tightening the screws on corporate leverage.

What’s coming up in the markets:

Investors will turn their attention to Federal Reserve Chair Janet Yellen’s testimony in Congress on Tuesday in Washington. Traders are pricing in a 30% chance the Fed lifts rates at its March 15 meeting, little changed from the probability seen at the start of this year.

Here are the main moves in markets on Tuesday:

Currencies

The Bloomberg Dollar Index fell 0.2% at 8:07 in London, after a 0.2 percent gain on Monday and last week’s 0.7% advance. The euro gained 0.1 percent to $1.0612. The yen added 0.2% to 113.55 per dollar, after falling 0.5% on Monday.

The Korean won jumped 1.3%, near the highest level since November.

The Australian dollar strengthened 0.5%. Business conditions jumped to the highest level in more than nine years and the employment gauge surged, diminishing the likelihood of interest-rate cuts in the near term.

Stocks

The MSCI All-Country index was flat at 440.97, near its all-time high of 442.70 reached in May 2015. The measure advanced over the previous four days.  

The Stoxx Europe 600 Index slipped 0.1%, after a five-day rally that brought it to the highest level in more than a year.

The FTSE 100 Index lost 0.3%. Japan’s Topix slipped 1%.

Toshiba tumbled 9.2 percent after delaying a scheduled earnings announcement meant to show how much of a loss the company was facing from its nuclear-equipment operations. Singapore’s Straits Times Index headed for the biggest decline since October, falling 1.3%.  

Hong Kong’s Hang Seng and the Shanghai Composite Index were flat, after four days of gains. Contracts on the S&P 500 fell 0.1%, after the benchmark index closed up 0.5% at a record 2 328.25 on Monday.

The Russell 2000 Index and Nasdaq also rose to all-time highs, as did Apple shares.

Bonds

The yield on 10-year Treasury notes was little changed at 2.44%, after climbing three basis points in the previous session.  Yields on Australian bonds advanced three basis points to 2.74%.

Commodities

Oil futures were little changed at $52.90 in New York, after snapping a three-day rally on Monday. Investors are weighing rising US crude stockpiles against output cuts from Opec and other producing nations.

Gold was 0.2% higher at $1 227.87, following a 0.7% drop in the previous session.

Copper extended a rally, climbing 0.2% to the highest since May 2015 in London, after the world’s two biggest mines halted some operations.

Read Fin24's top stories trending on Twitter:

ZAR/USD
16.81
(+0.47)
ZAR/GBP
21.22
(+0.58)
ZAR/EUR
18.99
(+1.02)
ZAR/AUD
11.71
(+0.92)
ZAR/JPY
0.16
(+0.56)
Gold
1803.70
(-0.23)
Silver
18.66
(+0.02)
Platinum
835.00
(-1.47)
Brent Crude
43.32
(+0.49)
Palladium
1952.00
(+2.01)
All Share
55787.90
(-0.15)
Top 40
51536.91
(-0.04)
Financial 15
10339.64
(+0.63)
Industrial 25
77428.31
(-0.10)
Resource 10
52587.29
(-0.39)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
I'm not really directly affected
18% - 1871 votes
I am taking a hit, but should be able to recover in the next year
23% - 2449 votes
My finances have been devastated
34% - 3644 votes
It's still too early to know what the full effect will be
25% - 2625 votes
Vote