Stocks fall, dollar sinks as politics take a toll

New York - US stocks opened lower and the euro climbed to its strongest level against the dollar since January 2015 as investors assessed an investigation into US President Donald Trump that may stall his economic agenda. European shares fell as the common currency’s rally weighed on carmakers and other exporters.

The euro gained impetus after ECB President Mario Draghi said on Thursday that the central bank will discuss in the autumn plans to unwind quantitative easing. All major US stock indices were down. The Bloomberg Dollar Spot Index hit an 11-month low. Copper led an advance in industrial metals, while oil traded lower as OPEC supply increased this month.

Increased 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.

In the US, politics are again at the forefront, with reports that US special counsel Robert Mueller is expanding his investigation of Trump less than a day after the president told the New York Times that any digging into his finances would cross a red line.

“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. “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.”

Here are the main moves in markets:

Stocks

• The S&P 500 Index was down 0.3% as of 15:38 after closing flat on Thursday.

• The Stoxx Europe 600 fell 0.8%, with automobile, construction and bank shares down. The gauge is heading for its first weekly drop in three.

Currencies

• The Bloomberg Dollar Index slid 0.2%, in line for a weekly loss of 0.9% as the greenback weakened against most of its G-10 peers. 

• The yen gained 0.6% to ¥111.29/$.

• The euro climbed 0.1% to $1.1642. The common currency has gained 1.4% this week, its second straight five-day advance.

Bonds

• The yield on 10-year Treasuries fell two basis point to 2.24%.

• Benchmark yields in Germany dropped three basis points to 0.5%, down eight points this week. Yields in France dipped four basis points.

Commodities

• West Texas Intermediate crude dropped 0.3% to 46.64 a barrel.

• Copper advanced 1.2% to $6 031 a ton, earlier touching a four month high, as it led a rally in industrial metals.

• Gold rose 0.6% to $1 251.66 an ounce and was poised for its first back-to-back weekly advance since June 2.

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