Top 5 Things to Know In the Market on Wednesday
1. Concerns over Trump dominate headlines
Capturing market headlines on Wednesday was the news that U.S. President Donald Trump asked back in February then FBI Director James Comey to halt an investigation into former National Security Adviser Michael Flynn’s ties with Russia.
The news raised concerns over whether Trump interfered with the judicial process and could be charged with accusations of obstruction.
After recent White House turmoil involving first Trump’s firing of Comey and then that the President later shared sensitive intelligence obtained from a close U.S. ally with Russia’s foreign minister about an Islamic State operation, investors began to doubt that the Trump administration will be able to get a divided U.S. Congress to push through his economic stimulus program amid the political upheaval.
2. Fed rate hike bets continue to recede
With market participants considering that there will be further delays in any Trump policies for economic stimulus, odds for the next rate hike by the Federal Reserve (Fed) continued to slip lower.
According to Investing.com’s Fed Rate Monitor Tool, Fed fund futures currently price in the chance of the first hike arriving in June at around 64%, after having risen above 80% the prior week.
Markets further became less convinced that the Fed would manage to complete the two rate hikes they had predicted for this year. Last week, odds had hovered around the 50% threshold but were now holding at just around 31%.
3. Dollar continues decline, gold strengthens on stimulus delay concerns
The dollar continued to decline Wednesday, hitting fresh six-month lows against major rivals, as the mounting political turmoil in the U.S. pushed expectations for monetary policy tightening back and weighed on the greenback.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.19% at 97.91 by 5:57AM ET (9:57GMT) after touching an overnight low of 97.76, the weakest since November 9.
Meanwhile, the weaker dollar and safe haven demand in the face of political uncertainty pushed gold to a two-week high on Wednesday.
Comex gold futures traded near its highest levels since May 3, rising $9.17, or about 0.7%, to $1,245.57 a troy ounce by 5:58AM ET (9:58GMT).
4. Global stocks shift to risk-off mode on Trump worries
Global stocks moved into risk-off mode on Wednesday, as mounting concerns over fresh U.S. political events continued to weigh heavily on market sentiment.
U.S. stock futures pointed to a lower open on Friday in what would be a session lacking in major economic reports. At 5:59AM ET (9:59GMT), the blue-chip Dow futures lost 0.49%, S&P 500 futures fell 0.53% and the Nasdaq 100 futures traded down 0.40%.
Elsewhere, European equities also moved broadly lower, contaminated by the risk-off attitude, with the benchmark Euro Stoxx 50 down 0.41% by 6:00AM ET (10:00GMT) and Germany’s DAX off 0.41%.
Earlier, Asian stocks closed lower with the Shanghai Composite recording losses of 0.26% and Japan’s Nikkei sliding 0.60%.
5. Oil slips on crude inventory build
Oil prices edged lower on Wednesday, moving further away from the strongest level in more than three weeks after industry data overnight showed a surprise increase in U.S. oil stockpiles.
After markets closed Tuesday, the American Petroleum Institute said that U.S. oil inventories rose by 882,000 barrels in the week ended May 12.
The U.S. Energy Information Administration will release its official weekly oil supplies reportat 10:30AM ET (14:30GMT) Wednesday amid expectations for a draw of 2.3 million barrels.
Oil had rallied to its highest since April 28 at $49.66 at the start of the week on news that Saudi Arabia and Russia agreed to extend oil output cuts for a further nine months until March 2018.
U.S. crude oil futures fell 0.21% to $48.56 at 6:02AM ET (10:02GMT), while Brent oil held steady at $51.65.