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May 18, 2017

Asia, Europe and US Stock Markets Closings' Summaries on May 18, 2017

Kenan Machado

Asian equity markets fell Thursday, extending a selloff in the U.S. overnight, as doubts increased that the Trump administration would be able to deliver on its policy goals due to mounting political problems.
The latest political developments have put President Donald Trump’s administration on the defensive and investors world-wide are worried about his ability to push through proposals on tax cuts, deregulation and infrastructure spending.
Concerns among global investors got worse on Tuesday when reports emerged that Trump asked James Comey, who he subsequently fired as the head of the Federal Bureau of Administration, to back off the investigation of former national security adviser Michael Flynn. The White House has denied the account.
The news that former FBI Director Robert Mueller will serve as special counsel to oversee a federal investigation into alleged Russian interference in the 2016 presidential election did little to calm market jitters.
Japan’s Nikkei Stock Average NIK, -1.32%   fell 1.3%. A global flight to haven assets boosted the value of the yen, weighing on the country’s exporters.
The U.S. dollar USDJPY, +0.60%   dropped 2% overnight against the yen, registering its largest one-day percentage decline since July 2016. In Asian trade, the dollar recovered slightly Thursday to trade up 0.2% at ¥111.01. Among key exporter stocks, Mitsubishi Motors 7211, -2.96%   ended 3% lower, while Mazda Motor 7261, -2.23%   and Honda Motor 7267, -2.23%   each declined 2.2%.
“The aggressive risk-off reverberations are taking the market by surprise right now,” said Stephen Innes, head of trading for Asia at forex broker Oanda.

Carla Mozee, Victor Reklaitis

European stocks dropped Thursday, retreating for a second session as continuing U.S. political turmoil cast doubt on whether President Donald Trump’s pro-economic growth policies will become reality.
The Stoxx Europe 600 index SXXP, -0.50% ) lost 0.5% to end at 389.19. The move builds on Wednesday’s slide of 1.2%, which marked the benchmark’s biggest one-day percentage loss since late September and followed Tuesday’s flat finish.
Investors on Wednesday began fleeing assets perceived as risky, such as stocks, after a report that Trump had asked James Comey, then director of the Federal Bureau of Investigation, to halt a probe into links between Trump’s associates and Russian officials. In the U.S. on Wednesday, the S&P 500 index SPX, +0.37%  and the Dow Jones Industrial Average DJIA, +0.27%  logged their worst declines since Sept. 9. The two American stock gauges were rebounding somewhat on Thursday.
Read: Here’s how impeachment works—and why Trump is safe for now
“With optimism rapidly diminishing over Trump’s proposed fiscal spending and his administration coming under increasing pressure, the Trump rally seems to be a theme of the past,” said FXTM research analyst Lukman Otunuga, in a note.
“Stock markets may be in store for further punishment moving forward, as political turmoil in the US and ongoing geopolitical tensions are adding to the mounting uncertainty over Trump,” he said.
European bank shares were struggling on concerns the Trump administration won’t be able to push through looser regulations for the financial industry. The Stoxx Europe 600 Bank FX7, -0.80%  flopped down 0.8%.
Pressure on shares of European exporters also came from strength in the euro, which this week rose above $1.11 for the first time since November. The shared currency EURUSD, -0.4750%  on Thursday bought $1.1131, compared with $1.1159 late Wednesday.
Individual indexes: Germany’s DAX 30 DAX, -0.33% which has notched record closing highs in recent sessions, fell 0.3% to end at 12,590.06.
In London, the FTSE 100 UKX, -0.89%  dropped 0.9% to 7,436.42. The index came under further pressure as the pound GBPUSD, -0.2159%  rose above $1.30 for the first time since September, after U.K. retail sales burst past expectations.
Check out: The pound looks set for ‘significant further upside’ now that it’s regained $1.30
France’s CAC 40 PX1, -0.53%  declined 0.5% to finish at 5,289.73.
Stock movers: Fiat Chrysler Automobiles NV FCA, -3.11%  shares fell 3.1% after reports that the U.S. Justice Department plans to file a civil lawsuit against the auto maker over excess diesel emissions, if no agreement is reached.
Altice NV ATC, -1.49%  shares lost 1.5%. The Dutch telecom broke European Union rules by carrying out its acquisition of PT Portugal before notifying or getting approval from regulators, the EU’s competition watchdog said in a statement Thursday.
Economic data: France’s unemployment rate dropped to 9.6%, a five-year low, as the job market improved for young people.
U.K. retail sales rebounded in April, following a steep quarterly decline in the first three months of the year. Retail sales grew by 2.3% on the month, significantly more than the 1.5% growth seen in a Wall Street Journal poll.

Barbara Kollmeyer, Ryan Vlastelica

U.S. stocks closed higher Thursday, following the previous session’s brutal selloff, as positive data offered a glimmer of optimism and technology provided an additional fillip to the market.
The Nasdaq Composite Index COMP, +0.73% COMP, +0.73% finished up 43.89 points, or 0.7%, at 6,055.13, after briefly losing its grip on the psychologically significant level of 6,000 in opening trade. On Wednesday, the technology-heavy index saw its worst one-day decline since late June.
The index was supported by rebounds in major technology names, including Apple Inc. AAPL, +1.52% Inc. AMZN, +1.45% and Facebook Inc. FB, +1.94% , all of which closed up 1.5% or more on the day. The three are all among the largest companies by market value, which helped to boost the overall market. The broader market was more evenly divided, with slightly more advancing stocks than decliners on the New York Stock Exchange.
The Dow Jones Industrial Average DJIA, +0.27%  closed up 56.09 points, or 0.3%, at 20,663.02, after a brief peak during the session at above-100-point gains. The blue-chip average was led higher by shares of Wal-Mart Stores Inc. WMT, +3.22% which closed up 3.2% as earnings beat Wall Street forecasts, but revenue fell slightly short.
Read: Wal-Mart option traders are ‘overly complacent’ about earnings
Meanwhile, shares of Cisco Systems Inc. CSCO, -7.21%  dragged on the Dow, falling 7.2% and hitting their lowest level since January as the networking giant reported its revenue decline was accelerating and said it would lay off another 1,100 workers.
Read: Cisco shows effects of Trump uncertainty
The S&P 500 index SPX, +0.37%  rose 8.69 points, or 0.4%, to close at 2,365.72, as nine out of 11 sectors finished higher, with the telecom, consumer-discretionary and tech sectors leading the charge.
Both the Dow and the S&P 500 suffered their worst daily slump since early September in the previous session.
Equities were helped in part by the latest economic data. Initial jobless claims fell by 4,000 in the latest week, the second-lowest reading of the economic recovery, which began eight years ago. Continuing claims were at their lowest level since 1988. Separately, the Philadelphia Fed manufacturing index jumped to a reading of 38.8 in May from 22 in April.
While investors have been holding firm in light of the drama out of Washington, Wednesday’s revelations caused the market to question whether controversies surrounding the White House would derail President Donald Trump’s economic agenda, said Karyn Cavanaugh, senior market strategist at Voya Financial, in an interview.
“Investors wanted a pullback and they got one,” Cavanaugh said. “We’re still looking forward to pro-growth policies and no matter who is in the White House, we’re still looking for pro-growth policies.”
The lack of a follow-through in that selloff on Thursday points to the thinking that the economy is still doing relatively well , that companies turned in a strong earnings quarter, and that the drama out of D.C. will have little effect on how companies are doing business, Cavanaugh said.
“Even though optimism for Trump’s pro-growth agenda has mostly unwound, if this political crisis deepens and elevated volatility persists, equities could see further weakness in the short-term driven by deleveraging across fundamental and systematic strategies,” J.P. Morgan wrote in a note to clients, adding that “fundamentals remain supportive.”
Wednesday’s decline came after the New York Times reported that Trump had asked former FBI Director James Comey to drop an investigation into possible ties between his inner circle and the Russians. Among other things, the controversy was seen as making the passage of Trump’s economic agenda — something analysts say is necessary to justify market valuations — less likely.
Wall Street could continue to be driven by the news coming out of Washington. Earlier on Thursday, Reuters reported that former National Security Adviser Michael Flynn and others on Trump’s campaign team exchanged at least 18 undisclosed phone calls or emails with Russian contacts during the 2016 presidential race.
“The scandal is so dominant at the moment that I guess it doesn’t take a lot to spook investors,” said Connor Campbell, financial analyst at Spreadex, in emailed comments.
Need to know: The wheels are coming off for U.S. stocks, this classic gauge shows
The reports have sparked talk of potential impeachment for Trump, though many believe the situation is far from reaching that point. In one recent development, former FBI head Robert Mueller has now been named as special counsel to investigate potential collusion between the Trump campaign and Russia.
Read: Stocks have an 86% chance of falling if weekly volatility rises
Stocks to watch: Alibaba Group Holding Ltd. BABA, +0.46% rose 0.5% even after earnings fell short of expectations.
Shares of Pandora Media Inc. P, +5.49%  rose 5.5% after a report that Liberty Media is in talks to buy the internet radio company.
CarMax Inc. KMX, +6.15%  shares rallied 6.2% after Wedbush Securities raised their price target on the stock to $70.
Shares of Incyte Corp. INCY, +6.90%  and ImmunoGen Inc. IMGN, +14.16%  jumped on promising results from an experimental lung cancer drug. Incyte shares finished up 6.9% while ImmunoGen shares closed up 14%.
U.S.-listed shares of Brazil stocks and exchange-traded funds were under pressure after the country’s opposition lawmakers called for President Michel Temer to resign after a bribery allegation. U.S.-listed shares of Brazilian multinational Vale SA VALE, -6.32%  tumbled 6.3%, while the iShares MSCI Brazil Capped ETF EWZ, -16.33%  dropped 16%.
Cleveland Fed President Loretta Mester reiterated comments similar to those from May 8, stating that she sees stronger consumer spending ahead and that the Fed needs to keep raising rates.
The dollar DXY, +0.48% fluctuated between gains and losses and was last down less than 0.1%, with the British pound GBPUSD, -0.1159%  popping above $1.30 for the first time since September after strong retail sales.
Read: Bernanke says he’s always ‘puzzled’ by way markets ignore political risk until ‘last moment’
Overseas markets: Global stocks fell Thursday in the wake of the U.S. selloff. The Nikkei 225 index NIK, -1.32%  slid 1.3% alongside a sharp rise in the Japanese yen, which has surged as investors seek out perceived haven assets.
European stocks finished lower as the Stoxx Europe 600 index SXXP, -0.50% finished down 0.5%, adding to a 1.2% decline Wednesday that marked its biggest one-day percentage loss since Sept. 26. 
Read: Global investors must remember ‘all news is local,’ says Mark Mobius
Gold prices GCM7, -0.99%  settled down 0.5% at $1,252.80, while oil prices CLM7, +0.53% traded higher, with West Texas Intermediate crude settling up 0.6% at $49.35 a barrel.
—Barbara Kollmeyer in Madrid contributed to this article.