Markets across Asia tumbled yesterday after US President Donald Trump's mounting political problems cast doubt on his ability to deliver promised pro-growth policies.
Earlier, Wall Street suffered its worst sell-off in eight months after analysts raised the spectre of a possible Trump impeachment.
US markets remained jittery in early trading yesterday, with key indices swinging between losses and gains, fuelled by a Reuters report that former national security adviser Michael Flynn and others on Mr Trump's campaign team had exchanged at least 18 undisclosed calls or e-mails with Russian contacts during the 2016 presidential race.
The Dow Jones and S&P 500 each tanked 1.8 per cent on Wednesday following reports that Mr Trump may have obstructed a federal probe. That sent Japan skidding 1.32 per cent yesterday. Shenzhen fell 0.63 per cent, while Hong Kong and Malaysia slid 0.62 per cent.
In Singapore, bargain hunters swooped quickly after the Straits Times Index lost 1 per cent at the opening bell. Stocks ended the day down just a tad, by 0.08 per cent.
Although impeachment probably remains a dim prospect, markets have started to price in a substantial delay in Mr Trump pushing through tax reform legislation aimed at boosting the economy.
The greenback weakened against most currencies, including the Singapore dollar.
One US dollar fetched S$1.3914 yesterday, compared with S$1.3947 on Wednesday.
"Increasingly, he looks like a lame duck president, which casts doubt on the legislative agenda," Bank of Singapore chief economist Richard Jerram noted.
"But Republicans still control Congress, so (he) should be able to implement some tax reform."
Many economists believe that, at best, Mr Trump's reform plans will be delayed. "The markets are trying to unwind expectations of 'Trumponomics', which includes US$1 trillion of infrastructure plans, unprecedented tax reform and financial deregulation," CMC Markets analyst Margaret Yang said.
The Federal Reserve is still likely to hike rates again next month, even though traders have marked down the odds of this happening.
CIMB economist Song Seng Wun said the US political turmoil provided "a good excuse" for people to take profit after record runs.
"But the underlying fundamentals have not changed. Even though Singapore non-oil domestic exports in April fell... that is due to a drop in pharmaceuticals shipments. The underlying support from the tech sector remains," he said.
"Still, stock prices have run ahead of themselves, especially Singapore bank shares. So, a pullback is expected."
SEE BUSINESS: Talk of Trump impeachment stirs markets