Dow dives 373 points as Trump drama rattles market

United States President Donald Trump speaks with President of Russia Vladimir Putin on the telephone in the Oval Office

United States President Donald Trump speaks with President of Russia Vladimir Putin on the telephone in the Oval Office

The Dow Jones industrial average fell 372 points, and both the Dow and S&P 500 suffered their worst percentage drops since September 9.

The Dow average lost 372.82 points, the most in eight months, while the Nasdaq Composite Index plunged 2.6 percent for its steepest drop since June 24.

Financial companies led stocks sharply lower in early trading as investors fretted over the potential fallout roiling the Trump administration.

"Market participants figure that there is virtually no chance of any US company tax cuts getting through the Congress while President Trump is defending the allegations of an obstruction of justice - an impeachable offence", Commonwealth Bank of Australia said in a note on Thursday.

Bank stocks, which outperformed in the post-election rally, were the worst hit.

The sell-off snapped an unusually long period of calm after hitting a series of record highs.

The Standard & Poor's 500 index slumped 16 points, or 0.7 percent, to 2,383.

US stock futures were off 0.5 per cent, though they were still close to record highs.

Investors piled into assets they perceive as havens, sending gold up 1.8% to $US1259.00 an ounce, and the yield on the benchmark 10-year Treasury note fell to 2.219% from 2.329% on Tuesday.

Bond prices rose sharply.

The ICE US Dollar Index, which measures the dollar against a basket of six currencies, fell 0.6% and was on track for its lowest close since before the election.

-Crude futures added 1.25 percent, reversing an earlier 1.3 percent loss, with gains accelerating after the release of USA government data on inventories.

The news came after a tumultuous week at the White House when Trump unexpectedly fired Federal Bureau of Investigation director Comey and reportedly disclosed classified information to Russia's foreign minister about a planned Islamic State operation.

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MR Trump had already been facing pointed questions about his discussions with Russian diplomats during which he was reported to have disclosed classified information. Bank of America sank 2.7 percent and Wells Fargo lost 2 percent.

It's always easy to blame what's happening in financial markets on the biggest headline of the day. The VIX, Wall Street's "fear gauge", shot up to 13.72, its highest level in almost one month. Investors shifted into USA government bonds, pushing yields lower, and into gold. Gold future headed for a sixth straight gain, climbing 1.9 percent.

Banks are leading US stock indexes sharply lower in midday trading as bond yields fall, which will mean lower interest rates on loans. Even with Wednesday's declines, the S&P 500 stock index is up 10.2 percent since last November's USA elections though.

The euro added 0.6 percent to $1.1152, extending Tuesday's 1 percent surge and heading for the highest since November 4.

The dollar dropped a sixth day, while Treasury 10-year yields tumbled below 2.25 per cent.

ENERGY: Benchmark U.S. crude oil futures slipped 15 cents to $48.92 a barrel in electronic trading on the New York Mercantile Exchange.

Oil and gas stocks retreated 1.2 per cent despite higher crude oil prices.

The pound rose above 1.30 against the U.S. dollar for the first time since September, as strong United Kingdom retail sales gave a boost to sterling and jitters surrounding calls for Donald Trump's impeachment weighed on the greenback. Copper was little changed at 2.54 dollars per pound.

The S&P 500 was also tracking towards the biggest one-day drop in more than seven months.

MSCI's gauge of stocks across the globe fell 1.2 percent, while European shares ended down 1.4 percent.

In Europe the Stoxx 600 Index finished the session with a decline of 1.2 percent from the previous close.

Polcari added he expected the market to fall even further. Japan's Nikkei 225 dropped 0.5 percent, while South Korea's Kospi dipped 0.1 percent.

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