Posted: Monday, March 27, 2017 – 11:08 AM
Stock markets dropped Monday and the dollar slid on concerns that the collapse of President Donald Trump’s repeal of Obamacare could leave him struggling to push through his promised tax-cut and infrastructure spending policies.
In a severe early blow to the new administration, the healthcare reform was pulled Friday as it failed to win enough support among Trump’s Republican party, who have a majority in both houses of Congress.
While the tycoon said he would now move on to tax reform, the failure of the bill — which was seen as a litmus test for his ability to push through his economy-boosting agenda — has led to concern about future policies.
“Stocks were under pressure on Monday following the collapse of Donald Trump’s first attempt to overturn Obamacare,” said Jasper Lawler, Senior Market Analyst at LCP.
“For many, the healthcare bill has been the moment that crystallised the risk of economic failure under The Donald.”
Ironically, resulting dollar weakness probably suits Trump, said Lawler, as it boosts the competitiveness of American companies abroad.
Wall Street was still around 70 points down approaching midday in New York, but well off opening lows. This partial recovery in turn helped European markets pare losses by the closing bell.
London and Frankfurt both ended 0.6 percent down, while Paris posted a smaller 0.1 percent loss at the close.
- Honeymoon over? -
“Is the Trump honeymoon over?” asked Jameel Ahmad at FXTM.
The president’s healthcare defeat “has made the markets begin to get nervous about what other possible hurdles Trump could potentially face when it comes to implementing other aspects of his campaign agenda”, he said.
Global markets had surged since November on hopes the president’s pledges to overhaul the tax code, ramp up spending and deregulate markets would fire the already healthy economy.
Tokyo’s Nikkei index led Monday’s losers, shedding 1.4 percent as the dollar retreated against the yen, while the greenback fell across the board.
On the corporate front Monday, the EU approved a $130-billion (120-billion euros) mega-merger of US agri-chemicals giants Dow Chemical and DuPont, paving the way for major consolidation in a sensitive sector for farmers and the environment.
Elsewhere, ECB data reported that growth in eurozone banks’ lending to businesses slowed in February.
Oil prices fell again, with the European Brent benchmark holding up just above $50 per barrel, and its US counterpart, WTI, now near $47.50.
Dealers said there were doubts over OPEC’s determination to extend current oil production cuts into the second half of the year as rising US output weighs on prices.
Gold, meanwhile, sparkled as a refuge investment in times of economic uncertainty, rising nearly half a percent on the day, but off its best levels as stocks recovered.
© Agence France-Presse