World stocks were set for a second day of losses on Friday after an exodus of U.S. executives from presidential business councils dealt a fresh blow to hopes of tax reform and deadly attacks in Barcelona hit shares in European tourism firms.
Investors fled into German and U.S. Treasury bonds and bought gold for the third day in a row, as U.S. policy uncertainty and fears of more attacks boosted the appeal of such top-notch assets.
U.S. equity markets appeared poised for a broadly weaker open, futures for the S&P 500 and Dow Jones indexes showed, though futures on the Nasdaq tech benchmark were up 0.13 percent. The turmoil in stocks also benefited gold, which broke through $1,300 an ounce for the first time since November.
Markets have been dismayed by U.S. President Donald Trump’s latest controversial comments on violence that flared in Charlottesville, Virginia, after a white nationalist protest.
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Several business leaders have since resigned from his advisory councils and a White House official said plans for a council on infrastructure had been dropped.
These developments have dashed hopes for tax cuts and infrastructure spending, Trump campaign promises that fueled much of this year’s gains in world stocks, emerging markets and commodities.
“Confidence that Trump’s economic agenda will be implemented has waned in recent months. We did not emphasize Trump’s declining support as a market factor (so far) because his base held. There are signs of it cracking,” Mark Chandler at Brown Brothers Harriman told clients.
“Heightened policy uncertainty may not be conducive to the investment climate and the same moment the Fed raises the decibel of its warning about asset prices,” Chandler said, referring to recent Federal Reserve comments on U.S. share valuations.
Equities worldwide are still on track to end the week in the black, as fears have ebbed that the standoff between the U.S. and North Korea will lead to war.
But with New York’s equity indexes all tumbling on Thursday to multi-week lows, MSCI’s index of Asian shares outside Japan fell 0.6 percent on Friday.
The pan-European STOXX 600 index fell 0.9 percent. Losses were led by travel and leisure as investors reacted to the Barcelona attack by selling shares in airlines such as Ryanair, EasyJet and Spanish airport firm AENA.
Madrid shares fell more than 1 percent.
All this took MSCI’s world index, which tracks shares in 46 countries, down 0.3 percent to one-week lows . The index has had a stellar run this year, having risen nine months in a row before August.
“Markets have been on the look for a trigger over the past couple of days, in our view, and may have found their catalyst,” analysts at TD Securities wrote, referring to the Barcelona attacks which have killed at least 13 people.
Weakness in the equity markets is heaping more pressure on the dollar, pushing it down 0.5 percent against the yen, the lowest in a week and approaching one-year lows of 108.13 yen hit in April.
The euro edged up 0.2 percent against the dollar. It had tumbled on Thursday to a three-week low of $1.1662, after the minutes of the European Central Bank’s July 20 policy meeting showed the bank was worried about the currency rising too much.
ING analysts saw the ECB’s euro concerns as justified and expects the ECB to proceed cautiously while unwinding its monetary stimulus.