NEW YORK (REUTERS, BLOOMBERG) - Shares were poised to slide across the Asia-Pacific on Thursday (April 13) after the US dollar slumped and Treasury bond yields dropped to the lowest level this year in reaction to President Donald Trump's comments that the greenback was getting too strong and that he would prefer the Federal Reserve keep interest rates low.
Trump also said that he won't brand China a currency manipulator in an interview with the Wall Street Journal on Wednesday, abandoning a core election promise that tapped into anger about trade-driven job losses. The remarks are seen as reducing the risk that China could dump its holding of Treasuries in retaliation for being tagged a currency manipulator.
The US dollar index, which measures the greenback against a basket of six other major currencies, was down 0.5 per cent at its lowest since late March.
The dollar was down 0.4 per cent against the yen, which is a favorite in uncertain times due to Japan's position as the world's largest creditor nation. The dollar fell 1.2 percent against the yen on Tuesday.
Global equity markets are entering a key period, with earnings season ramping up against a backdrop of mounting geopolitical tensions around Syria and North Korea as well as elections in Europe. Trump's struggle to push through his fiscal agenda and the debate over the pace of monetary policy adjustment in the world's biggest economy also cloud the picture.
"The market had a big reaction, but I think it was an overreaction because (Trump) may just be hedging his bets by making sure that the American public realizes he's not backing down on trade. It's just that he may not think now is the right time to brand China a currency manipulator," said Kathy Lien, managing director, at BK Asset Management in New York. "The dollar's already under pressure, so I think any excuse for further pressure is likely to bring the greenback even lower."
US Treasury yields fell, with benchmark yields hitting a near five-month low due to Trump's comments favoring low interest rates. Benchmark 10-year Treasury yields were 3 basis points lower at 2.268 per cent after hitting 2.259 per cent, which was the lowest since Nov. 17.
The Dow Jones Industrial Average fell 59.44 points, or 0.29 per cent, to end at 20,591.86, the S&P 500 lost 8.85 points, or 0.38 per cent, to 2,344.93 and the Nasdaq Composite dropped 30.61 points, or 0.52 per cent, to 5,836.16.
On Wall Street, defensive sectors were the biggest gainers in keeping with preferences for safety.
While a weaker dollar would help profits at multinational companies, stocks turned lower after Trump's comments, as he added "another wild card," according to Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.
"We all know markets like fairly stable situations," said Tuz. "Is this just another offhand comment from Donald Trump or does it really mean something and is it the start of a policy that you'll see introduced soon?"
Gold was up 0.9 per cent at US$1,286.10 an ounce, after jumping 1.6 per cent on Tuesday.
Trading Wednesday was also heavily influenced by rising US tensions with Russia, North Korea and Syria after U.S. missile strikes in Syria last week and the moving of US warships toward the Korean Peninsula.
Investor optimism had briefly improved during a joint press conference in Moscow held by US Secretary of State Rex Tillerson and Russia's Foreign Minister but the signs of optimism ebbed afterwards as it became clear officials did not seem any closer to agreement on Syria.
Oil prices ended lower after reversing earlier gains due to a report on US crude stockpiles. Oil futures turned negative after eight straight sessions of gains on the U.S. inventory data suggesting persistent oversupply.
Global benchmark Brent crude settled down 0.7 per cent at US$55.86 a barrel, while US crude settled down 0.5 per cent at US$53.11.