US equity markets saw a significant reversal in fortunes over yesterday’s trading session, paring ADP employment data-inspired gains after the release of Fed minutes to eventually close lower.
Accendo Markets Analyst Mike van Dulken commented – “Markets had been embracing the prospect of further Fed rate hikes this year, assuming these would be accompanied – even driven – by Trump stimulus policy driving stateside economic growth. The idea of the Fed also beginning to cease re-investment of maturing paper, slowly shrinking its asset pile, at the same time as markets question the validity of the ‘Trump trade’ and deal with plentiful geopolitical risk, has served to spark risk aversion just hours before Trump’s most crucial summit so far.”
Comments from House Speaker Paul Ryan that tax reform may take longer than expected also contributed to the largest single session reversal for US indices since January 2016, which saw Financial names weigh on both the Dow Jones and the S&P500 while the Tech-focused Nasdaq also under-performed.
That negative sentiment filtered all the way through the Asian session to the European open, mingling with the pre-Trump/Xi meeting jitters to send the region’s indices sharply into the red.
Spreadex Analyst Connor Campbell noted – “The FTSE was hit the hardest, plunging 1% to hit a sub-7300 lows not seen since the end of February. The Eurozone indices were almost as bad, both the DAX and CAC dropping by 0.6%, doing serious damage to the former’s hopes of hitting a fresh all-time high at some point this week.”
There isn’t much to distract from the Fed’s unwelcome news this morning. The market’s nerves may become more pronounced as Trump’s summit with China’s President, Xi Jinping, at the Mar-a-Largo club in Florida approaches.