ADVERTISEMENT

Here's How Markets Are Reacting to the Trump-Comey Turmoil

Trump has been under fire after dismissing FBI Director James Comey last week.

Here's How Markets Are Reacting to the Trump-Comey Turmoil
Traders work on the floor of the New York Stock Exchange (NYSE) in New York. (Photographer: Michael Nagle/Bloomberg)

(Bloomberg) -- The latest political turmoil in Washington has triggered a bout of risk aversion in financial markets after the extended lull of the past few weeks.

The S&P 500 Index fell the most since March, volatility surged and haven assets from gold to the yen advanced as the unrelenting pace of developments threatened to derail Trump administration policy prescriptions cheered by Wall Street.

“We have an environment now where we don’t speak about fiscal stimulus any more, we don’t talk about corporate tax cuts any more,” Commerzbank AG cross-asset strategist Max Kettner said in Bloomberg TV interview. The divergence between low volatility in the markets and high volatility in Washington "is unlikely to last very long," he added.

Sure enough, with the White House on the defensive, volatility gauges reflected growing anxiety among equity investors. The CBOE Volatility Index surged the most since September as of 10:53 a.m. in New York.

Here's How Markets Are Reacting to the Trump-Comey Turmoil

U.S. stocks, two days removed from a record close, are starting the day off by tumbling more than 1 percent, the largest since late March. The Dow Jones Industrial Average lost about 270 points in a broad selloff.

Here's How Markets Are Reacting to the Trump-Comey Turmoil

Big bank shares led declines as concern mounts that a White House on the defensive won’t be able to push though regulatory reform that Trump has made a part of his policy agenda. The KBW Bank Index is down more than 2.7 percent, while lenders in the S&P 500 fell the most since March 21.

Here's How Markets Are Reacting to the Trump-Comey Turmoil

The equity selling and volatility sent investors piling into assets deemed safest in times of crises. Gold future headed for a sixth straight gain, climbing 1.9 percent.

Here's How Markets Are Reacting to the Trump-Comey Turmoil

The yen, a haven currency thanks to Japan’s creditor-nation status, strengthened to its highest level in more than a week.

Here's How Markets Are Reacting to the Trump-Comey Turmoil

The euro also caught a bid, pushing the currency to its highest against the dollar since before the U.S. presidential election.

Here's How Markets Are Reacting to the Trump-Comey Turmoil

The greenback has taken a hit, with lackluster economic data also weighing it down:

Here's How Markets Are Reacting to the Trump-Comey Turmoil

The Bloomberg Dollar Spot Index has fallen for six straight days and is down almost 5 percent this year. Commerzbank’s Kettner said in the London interview that if macroeconomic data turn south, “effect for markets could be quite severe.”

--With assistance from Eric Lam

To contact the reporters on this story: Isobel Finkel in Istanbul at ifinkel1@bloomberg.net, Julie Verhage in New York at jverhage2@bloomberg.net.

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Samuel Potter at spotter33@bloomberg.net, Dave Liedtka