Stocks Fall, Dollar Sinks as Politics Take a Toll: Markets Wrap

(Bloomberg) -- U.S. stocks sank Friday and the euro climbed to its highest level against the dollar since January 2015 as investors assessed an investigation into U.S. President Donald Trump that may stall his economic agenda. European shares fell as the common currency’s rally weighed on carmakers and other exporters. Oil slumped after reports that OPEC supply increased this month.

All major U.S. equity gauges ended lower, with energy shares leading decliners in the S&P 500 Index. Industrials also struggled as General Electric Co. dropped 3 percent on the company’s warning that its earnings for the year will likely be at near the bottom of its projected range. The Bloomberg Dollar Spot Index hit a 14-month low.

Politics remained at the forefront in the U.S., with reports that special counsel Robert Mueller is expanding his investigation to include Trump’s business dealings and the president telling the New York Times that any digging into his finances would cross a red line. White House Press Secretary Sean Spicer resigned Friday as Trump named financier Anthony Scaramucci communications director.

The euro gathered momentum following Thursday’s comments by European Central Bank President Mario Draghi that policy makers in the fall will discuss unwinding quantitative easing. Rising hawkishness from the ECB has helped the euro rally from lows last seen near the start of the millennium, with investors expecting tapering to start in the new year and pricing in a 10 basis point rate hike by September 2018.

Read More: Dollar Bears Steal Spotlight From Draghi as Trump Probe Broadens

“Draghi tried to talk the euro down, even going so far as to suggest that ECB’s quantitative easing could be increased and prolonged,” said Yann Quelenn, a market strategist at Swissquote Bank SA. “But the currency markets were not buying Draghi’s line, and neither are we. Available bonds are too scarce, and turn to a taper is too clear to disguise.”

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Here are the main moves in markets:

Stocks

• The S&P 500 closed down less than 0.1 percent at 2,472.52. The Nasdaq Composite Index also dropped less 0.1 percent, the Dow Jones Industrial Average declined 0.2 percent and the Russell 2000 Index slid 0.5 percent.
• The Stoxx Europe 600 fell 1 percent, with automobile, construction and bank shares down. The gauge is heading for its first weekly drop in three.

Currencies

• The Bloomberg Dollar Index slid 0.3 percent to its lowest level since May 2016.
• The yen gained 0.7 percent to 111.11 per dollar.
• The euro climbed 0.3 percent to $1.167. The common currency has gained 1.7 percent this week, its second straight five-day advance.
• Read More: Euro Rally Shows Few Signs of Stopping as Draghi Appears Unfazed

Bonds

• The yield on 10-year Treasuries fell two basis point to 2.24 percent.
• Benchmark yields in Germany and France dropped two basis points.

Commodities

• West Texas Intermediate crude dropped 2.4 percent to 45.68 a barrel.
• Copper advanced 0.8 percent to $6,004 a ton, leading a rally in industrial metals.
• Gold rose 0.8 percent to $1,254.37 an ounce and was poised for its first back-to-back weekly advance since June 2.

--With assistance from Adam Haigh James Herron Simon Ballard and Eddie van der Walt

To contact the reporter on this story: Eric J. Weiner in New York at eweiner12@bloomberg.net.

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Robert Brand, Natasha Doff