Market wrap: US Administration continued to take its toll on markets - Westpac

Analysts at Westpac offered a market wrap.

Key Quotes:

"Global market sentiment: The turmoil in the US Administration continued to take its toll on markets. The S&P500 fell 1.7% - the largest one-day fall since 9 September, the US dollar and US interest rates also falling sharply.

News that former FBI Director Comey may be holding some controversial memos of Trump pressuring him to drop the Russia election ties investigation have raised the odds of a formal and independent probe. The market has interpreted this as potentially delaying the promised business-friendly reforms.

Interest rates: US 10yr treasury yields fell from 2.30% to 2.21% (a one-month low) and 2yr yields fell from 1.28% to 1.24%. Fed fund futures yields fell, pricing a June rate hike as an 70% chance (from 85% yesterday).

Currencies: The US dollar index is down 0.6% on the day, and has now given back all of its post-US election gains (and more). The persistent US dollar weakness boosted most major currencies, EUR rising from 1.1100 to 1.1158 – a six-month high. The safe-haven yen outperformed all, USD/JPY plunging from 112.50 to 110.90. AUD fluctuated in a 0.7390-0.7440 range, despite iron ore and other commodities performing well, while NZD pushed higher from 0.6880 to 0.6945. AUD/NZD fell from 1.0750 to 1.0699, the AUD seemingly more sensitive to the US’ political developments."