The dollar fell to a four-month low and U.S. equity futures accelerated Friday’s declines as investors shunned risk assets amid increased skepticism of U.S. President Donald Trump’s ability to implement his economic agenda. Gold climbed with bonds.
Volatility jumped across Asia and the yen strengthened to the highest since November, while benchmark gauges from Japan to Singapore fell on the heels of last week’s failed U.S. health-care deal. The dollar was on the verge of erasing the rally spurred by Trump’s election victory. Australian government bonds rose with Treasuries. Oil slipped and iron ore futures paced losses in raw materials.
“Investors will be a little more cautious as opposed to the rapid gains we witnessed from November,” said James Woods, a Sydney-based investment analyst at Rivkin Securities. “The defeat over Obamacare makes tax reform that much harder and the stakes are higher for markets.”
Reflation trades sparked by Trump’s election are faltering in March, with the dollar retreating and the S&P 500 Index headed for its worst month since October. Meanwhile, emerging-market assets have climbed, with the global equities gauge for developing nations on course for a third monthly gain in March.
Market calm is evaporating, after a volatility measure for the S&P 500 had its biggest weekly jump of the year and touched the highest level since December. Gauges of price swings from Hong Kong to India rose on Monday, with the volatility measure for the Nikkei 225 Stock Average climbing 11 percent.
“The test for markets comes tonight, as American investors face the first full session of trading,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney. “A significantly weaker U.S. dollar suggests the news is not fully priced into shares.”