Markets Live: Trump trade turns ugly – The Sydney Morning Herald

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Patrick Commins

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Shares slump for a second straight day extending the ASX’s losses as gathering controversy around the US presidency threatens to derail the global bull market.

  • Ahead of the open, Wall St suffered its worst drop in eight months
  • Fairfax shares jump after a second private equity bidder emerges
  • Jobless rates drops to 5.7 per cent, but part-time employment drives improvement
  • Sirtex shares slammed on poor research results

That’s it for Markets Live today.

Thanks for reading and your comments.       

See you all again tomorrow morning from 9.

market close

Shares tumbled for a second session in a sign investors may finally be shedding their complacency in regards to the potential fallout from the rolling controversies surrounding US president Donald Trump.

The S&P/ASX 200 index shed 48 points, or 0.8 per cent, to 5738 after dipping below 5700 points in morning trade. The heavy falls in US stocks leading into the open – the S&P 500 index fell 1.8 per cent – were not replicated in full on the local exchange, as investors had already pushed the ASX lower through the Wednesday session in anticipation of that night’s losses.

The Australian dollar strengthened following the release of official jobs data, which showed the unemployment rate dipped to 5.7 per cent in April from 5.9 per cent the prior month. The Aussie climbed US0.3¢ to trade at US74.6¢ in late Thursday trade.

A lift in Wall St futures through the session helped limit losses on the local bourse. The heavweight banks were the biggest drag on the ASX, but the losses among the big four lenders were not drastic. Westpac was the biggest single detractor as it traded without the right to its upcoming dividend and fell 3.1 per cent.

With the level of political uncertainty on the rise, “markets are set to enter risk-off mode in the near-term”, Credit Suisse strategist Hasan Tevfik said. Mr Tevfik tipped that more “defensive” style stocks should outperform in such an environment, and that is how it played out on Thursday. Reliable earners such as toll road operator Transurban Group and Sydney Airport were among the relatively few names to end the day in the black, adding 0.9 per cent and 1.2 per cent, respectively. Gold miners were also favoured as a result of their famed safehaven status.

Investors are now wondering whether the recent extended period of calm on Wall St has come to a definitive end.

“This all comes on the heels of the sharp dive in the US economic surprise index and last week’s further softness in US inflation,” NAB economist David de Garis said. “Now politics is intervening to add more noise into a market already wondering whether the US economy is slowing or not.”

Amid the overseas noise, there was no shortage of corporate news on the ASX.

Shares in Fairfax Media jumped 7 per cent to $1.24 on news of a competing bid from private equity firm Hellman & Friedman. The new offer was for as much as $1.25 per share, against a $1.20 offer from a consortium led by TPG. The publisher said it would allow both bidders to now conduct due diligence.

James Hardie shares slumped 7.8 per cent after the buildings group released annual profits, as the building materials company spoke of “reputational damage” as a result of US supply disruptions through the year.

Investors dumped Sirtex Medical shares after research into the company’s liver cancer treatment seemed to confirm that it had a dwindling chance of becoming a potential alternative to chemotherapy.

Winners and losers in the ASX 200 today. Winners and losers in the ASX 200 today. Photo: Bloomberg


Melbourne Institute’s gauge of consumers’ 12-month inflation expectations eased to 4 per cent from 4.1 per cent, data showed today.

The figures “support the view that consumer inflation expectations have stabilised“, NAB economist Tapas Strickland said.

The weighted mean of responses, which more closely tracks the RBA’s preferred measure of inflation, was also stable at 2.4 per cent and in the middle of the central bank’s 2-3 per cent target band.

The figures should give the RBA “a degree of confidence in its forecasts of underlying inflation getting back to the target band by mid-2018,” Mr Strickland said.

Photo: NAB

shares down

Vita Group shares continue to tumble, a week after the mobile phone retailer issued a profit downgrade on the back of an unfavourable renegotiation of its lucrative relationship with Telstra. That news sparked a 30 per cent plunge in Vita’s stock.

This week Vita, which operates Telstra-branded stores, was battered again as the big telco said it would reduce remuneration to Vita by around 10 per cent, and by a further 10 per cent at the start of each of the 2019 and 2020 financial years. On Wednesday the stock dropped another 30 per cent. Analysts at Canaccord were the latest to drop their estimates, on Thursday telling clients forecasting the shares would be $1.03 in 12 months’ time, from their previous target of $2.26.

They retained their “hold” recommendation, a stance echoed by the two other brokers covering the stock. Vita has slipped another 2.8 per cent today to 88¢. In September last year they peaked at $5.35.


Wait, what? There’s more than one property market?

The managing director of listed childcare centre landlord Arena REIT says the debt-fuelled binge by investors on commercial property means the odds of a downturn are now “well beyond the tipping point”.

“Record low yields, new supply, generally high debt levels, increasing debt margins and investors are acting like the market never goes down,” Arena REIT managing director Bryce Mitchelson told The Australian Financial Review.

“As a prudent investor, the best you can do is understand the odds and be prepared for the inevitable downturn…if and when property prices drop 20 per cent, will/can you survive?

“Operating on high debt levels, given it’s leverage effect, is very dangerous in a downturn…it can wipe you completely out…it’s not a pleasant experience. The wealth destruction is horrendous and painful.”

Mr Mitchelson’s remarks follow a warning from professional property investor Alex Collins that a correction could be looming for commercial property because of the “insane prices” being paid by investors which are driving down yields at the same as the cost of fund is going up.

Mr Collins and his father-in-law, Con Angelatos bought a supermarket in Maryborough, a regional Queensland town for $13 million on a six per cent yield.

But he was aghast at the yields being achieved on some assets including a childcare centre in Vaucluse in Sydney’s Eastern Suburbs which sold on a record low 3.6 per cent yield and a strata retail property in St Kilda which sold on a four per cent return.

“A lot of these properties have no growth built in to their leases. There could be a crunch if funding dries up,” Mr Collins said.

'The Australian property market is now late in the cycle.' ‘The Australian property market is now late in the cycle.’ Photo: Paul Jeffers Back to top


This morning’s jobs data suggests that the labour market “has come to life”, Capital Economics economist Paul Dales said:

Of course, the jobs data always need to be treated with caution, but the recent strengthening does fit with the improvement shown by measures published by other organisations.

We doubt the unemployment rate will rise back much, but equally it’s unlikely to fall far too. Overall, these figures further reduce any lingering chances of more rate cuts. But the labour market won’t prompt the RBA to hike rates for a long time yet.

Barclays economist Rahul Bajoria is optimistic:

We expect the full-time and part-time employment trends to continue to show a gradual reversal. In our view, this trend is critical for both wage growth and inflation expectations, and we believe full-time employment is likely to do better than part-time employment, as nominal GDP growth picks up.

We forecast the hiking cycle to begin with a 25bp rate increase at the May 2018 RBA meeting, followed by two more hikes, of 25bp each, at the August and November 2018 meetings. However, we think the RBA is likely to wait for CPI inflation to be consistently above 2% in the next 6-12 months before signalling a shift in its stance.

Indeed, the solid jobs numbers give the RBA “more time to ponder”, Citi economist Josh Williamson writes:

High frequency activity data on retail sales, building approvals, private sector credit and the latest wage price series points to a continuation of soft domestic demand growth and underlying CPI inflation struggling to move persistently above the bottom of the RBA’s target band this year. These data sets also don’t accord with the above trend jobs gains produced in March and April.

That said, the NAB’s employment conditions series in the business confidence data has pointed to faster employment growth.

Given the RBA has presented a more optimistic view of economic conditions than some investors have, the Bank will likely use today’s data to persist with the neutral policy stance and take more time to assess other weaker activity data.

ANZ’s David Plank picks up on a similar theme:

Given the strength of labour market indicators from sources such as business confidence and ANZ job ads we are not overly surprised by the strength of the April jobs report, even if it was above our forecast. We think this could continue for a while yet, hopefully stemming the trend decline in consumer confidence seen since the start of the year. 


shares down

Shares in chemical treatment outfit Sirtex have slumped following the release of poor research results that may limit the chances of its SIR-spheres from moving beyond just the last-line, so-called salvage, treatment.

The company had hoped the research would open the door for it to potentially replace chemotherapy as the primary treatment for colorectal cancer.

The shares crashed, trading down 24 per cent to $11.42. Trading had been suspended until earlier this afternoon, as the company released details of the research results and prepared its response.

Over the past 12 months, the shares have declined by more than three quarters, after trading above $41 a year ago amid wild investor optimism that results from earlier research could see its cancer treatment used more widely.

The latest study into metastatic colorectal cancer failed to achieve a survival benefit over the existing standard of care.

“Our initial conclusion is that this represents a poor outcome for the company,” Bell Potter analyst John Hester said.

“In our view SIR spheres are likely to continue to be used in the salvage therapy setting only. “

Sirtex's SIR-Spheres product for liver cancer did not extend the lives of patients when compared to the standard ... Sirtex’s SIR-Spheres product for liver cancer did not extend the lives of patients when compared to the standard chemotherapy treatment. 

How badly is the market doing today? Why this badly.

Enjoy our lunchtime wrap


International bettors are ramping up wagers in niche online markets over whether Donald Trump will serve out a full term as US president in the wake of the controversies surrounding his dismissal of FBI Director James Comey.

Some, such as the online political stock market PredictIt, have seen record volume during the last two days on contracts focused on whether Trump will be impeached. Others based in the United Kingdom are drawing bets on the less-specific question of whether Trump remains in office until his term expires in January 2021.

The contract on PredictIt titled “Will Donald Trump be impeached in 2017?” saw volume of more than 100,000 contracts in the last 24 hours after reports of a memo written by Comey that said Trump had asked him to end the FBI’s probe into ties between former White House national security adviser Michael Flynn and Russia.

At one point early on Wednesday, the price of a “yes” contract on the impeachment question jumped to a record US33 cents, implying a 33 per cent probability that Trump would be impeached. That compares with only 7 per cent just over a week ago.

By late in the day, however, the price had slid back to 27 per cent, just above where it ended late on Tuesday at 24 per cent.

PredictIt is jointly run by Washington political consultancy Aristotle and Victoria University in Wellington, New Zealand. All of its users are registered US voters.

British betting firm Ladbrokes cut the price of a Trump impeachment to odds-on at 4-5 from 11-10, equivalent to about 56 per cent probability that Trump will be removed from office.

“Political punters are wondering how many more scandals can Trump overcome,” said Ladbrokes spokeswoman Jessica Bridge.

“And despite the short price on offer, money has poured in for the president to be impeached, leaving us with little option but to cut the odds.”

Read more.

Donald Trump is facing the deepest crisis yet of his near four-month presidency. Donald Trump is facing the deepest crisis yet of his near four-month presidency. Photo: Bloomberg


The imminent arrival of the American online retailing behemoth has cramped Wesfarmers’ style, writes BusinessDay columnist Elizabeth Knight:

The imminent arrival of Amazon has skewered Wesfarmers’ ability to do what it does best – horse trading assets.

The Perth-based company has an established record of buying low and selling after a well-engineered renovation.

The decision to pull the Officeworks float is more meaningful for Wesfarmers than just ditching the sale of this asset. Investors have been applying pressure on Wesfarmers to refresh its line-up of businesses for a while. And Officeworks looked to be the best candidate to be churned.

The trouble is that Wesfarmers seems to have left its run too late. Six months ago this deal would probably have been done easily and at a price that ticked all the boxes.

The window of opportunity now seems to have closed for any would-be seller of retail businesses.

Its coal assets are also on the market through a process kicked off late last year. And although there appeared to be a flurry of initial interest, the talk has gone quiet over the past few months around the sale of the coking coal assets in the Bowen Basin and the stake in the Hunter Valley thermal mine.

Coal assets aside, the majority of Wesfarmers’ businesses are now in retail which is challenged thanks to a pincer – one side being the spectre of Amazon and the other pretty horrific consumer conditions.

Officeworks was chosen by Wesfarmers as the prime candidate for sale because it was easiest to amputate from the rest of the portfolio and it’s an asset easy to market to shareholders – a good history of growth and a business that has been well run.

Wesfarmers is not totally conceding defeat. If a trade buyer emerges offering an attractive price then it’s game on. But given trade buyers – the most likely would have been private equity – had already been canvassed in parallel with the IPO, we can assume none came up with a compelling bid.

Read more.

Outgoing Wesfarmers managing director Richard Goyder. Outgoing Wesfarmers managing director Richard Goyder. Photo: David Rowe Back to top

Virgin Australia’s losses widened in the third quarter due to a subdued domestic market, unfavourable currency movements and the cost of simplifying its fleet.

The airline said its third quarter net loss was $69 million while its underling pre-tax loss was $62.3 million.

Virgin said the result was hurt by a cyclone in Queensland in March, the withdrawal of Tigerair’s Bali operations, a subdued domestic market and currency fluctuations.

The airline is focused on paying down debt and improving cash flow after raising more than $1 billion in capital from its big airline shareholders. Net debt fell $200 million I the quarter and the cash balance rose to $1.3 billion, Virgin said.

It is believed the airline is seeing signs of the domestic market improving in the fourth quarter.

Virgin posted a net loss of $21.5 million in the first-half and deferred plane deliveries as it focuses on paying down debt and cutting costs. First-half underlying profit before tax was $42.3 million, down $39.2 million.

The airline’s financial performance is a contrast to larger rival Qantas which earlier this month upgraded earnings forecasts, tipping a full-year underlying profit between $1.35 billion to $1.4 billion. Virgin is expected to post a loss this year.

Virgin Australia's losses widened over the quarter. Virgin Australia’s losses widened over the quarter. Photo: Sasha Woolley


Now back to what would be the market news of the session on most days, which is that the unemployment rate has dropped to 5.7 per cent from 5.9 per cent.

The ABS data shows that the economy created 37,400 jobs in April. Economists had been predicting a 5000 increase in jobs, but the monthly figures are so volatile that any guesstimates are even less likely than usual to be accurate.

A solid headline number does have a bit of a sting in the tail, though. We actually lost 11,600 full-time jobs in April, according to the ABS survey. The jump in total employment, then, came down to an extra 49,000 part-time roles.

In any case, the currency traders thought it an upbeat number. The Aussie had been trading lower into the release but jumped half a penny immediately after. It’s since eased a little to sit at 74.3 US cents, a little down from this morning.


True, things look to be going from bad to worse in markets and in Washington, but experts say it’s way too early to panic.

So far traders are more likely to be treating the market moves as a correction rather than a true crisis in the making.

“If you look at what our US desk is saying, there’s no sense of panic coming out of them at this stage,” Citi director of equities sales Karen Jorritsma said. “And globally, some of our clients are seeking value and come back in, to add reflation exposure cheaply given the pullback.”

“It’s an opportunity to step back into market that’s been overheated,” she said. “Overall, the guys here are pretty relaxed. It’s too early to say if this’ll last.”

The pullback in markets had the potential to be healthy, Perpetual Investments head of investment strategy Matthew Sherwood said.

“The one thing we have to remember is that while low volatility is really good, it can really lure investors into a false sense of security, thinking that all the risk is dissipated,” Mr Sherwood said.

And while investors might be feeling the pain of falling share prices, the fundamental impact on locally listed companies at this stage looks limited.

“In terms of earnings outlook, there’s no dramatic impact from this, other than for a handful of companies which have US economy exposure,” Mr Sherwood said. “It’ll be valuations where the downside is felt.”

“I think for us the situation in North Korea is also front of mind,” Ms Jorritsima said. “It’s never great for the ASX to see a Wall Street pullback, but there are other issues for us as well.”

And falling US bond yields were a positive for local bond holders, BT Investment Management head of fixed interest Vimal Gor said.

“We think [Aussie bonds] offer significant value on their own basis anyway,” Mr Gor said. “While this is a further tailwind, it’s not the only reason we think Australian bonds will perform well in the coming period.”

If you are getting really worried about the market's moves, experts say you should chill. If you are getting really worried about the market’s moves, experts say you should chill. Photo: Louise Southerden



Is this the start of something nasty? IG strategist Chris Weston wonders:

What we have seen has been a solid session of risk aversion, but is it the start of a trend lower in risk assets and a period of more elevated implied volatility, where we see the US volatility index (“VIX”) holding a 15 handle and perhaps moving into 20? That is yet to be seen and is seemingly going to the question that will be discussed first and foremost today.

And when so many global markets were at multi-year, if not all-time highs you know there would be some pain being felt out on the floors today

Will Trump be impeached? The answer to that lies in the source of the sell-off. Is this really about going as far as saying Trump is potentially staring at impeachment? This still seems such a high hurdle given the makeup of both the House of Representatives and Senate and the math needed to push through an Article of Impeachment. Importantly, Trump hasn’t actually been accused of any crimes yet, and while Article II of the US Constitution actually pushes out to “treason, bribery or other high crimes and misdemeanours”, the political analysts out there would still point to a very low probability of impeachment at this stage.

All eyes now fall on the House Committee hearing next Wednesday (Thursday 23:30 aest for Aussies), where former FBI director James Comey has been invited to testify on the allegations that Trump asked Mr Comey to “let go” his investigation into former National Security Advisor Michael Flynn. At this stage, we don’t know if this hearing is to be public, but it is now the must-watch event and if public will attract massive ratings. 

Read more.

Is this the start of something worse? Or a passing squall? Is this the start of something worse? Or a passing squall? Photo: David Rowe

market open

No surprise that shares have taken a whack in early trade, although the ASX does look to be recovering somewhat following the opening slump.

Still, the ASX 200 is off 65 points, or 1.1 per cent, at 5721. The morning’s losses brings the fall over yesterday and this morning to 130 points.

Only one in 10 of the top 200 are in the black, and most of them are gold miners, as traders predictably flock to producers of the yellow metal amid a spike in market volatility.

More “defensive” stocks, such as AGL Energy, Transurban Group, Sydney Airport and AusNet are all higher. Falling bond yields helps their cause as well. The utilities sector is up 0.2 per cent.

But back to the drivers for the morning’s losses, and they are heavily concentrated in financial names. Westpac is off 4.5 per cent, but that’s in large part as it is trading ex-dividend this morning. Stripping out that effect, the bank is down 1.6 per cent and its Big Four peers are down around 1 per cent. So nothing too drastic – they all fell yesterday in anticipation of a tough night on Wall St.

The big miners BHP and Rio are off around half a per cent, as are fellow bluechips such as CSL, Telstra, Woolies and Wesfarmers.

Winners and losers in the ASX 200. Winners and losers in the ASX 200. Photo: Bloomberg Back to top

money printing

And in corporate news, lower than expected asbestos claims helped building materials group James Hardie offset a squeeze on margins due to operational problems in the US to post higher earnings in the year to March as it continues to invest to lift capacity.

Commissioning difficulties at start-ups in the US hit margins hard during the year, but the bottom line impact was muted thanks to lower asbestos claims, which resulted in a $US38.6 million ($52 million) “favourable movement in the actuarial adjustment” by its advisers, it said.

As a result, the group net profit rose to $US276.5 million, from $US244.4 million, for the year to March. Earnings a share for the year hit US62¢, up from US55¢.

A US28¢ a share final dividend has been declared.

The profit topped forecasts, which ranged from $US245 million to $255 million.

Investor focus remains on the hit to margins in the US due to plant commissioning problems and higher input costs such as rising pulp, energy and freight costs.

James Hardie is bringing on additional capacity this year at its Summerville and Plant City sites in the US, and is working on new plants at Tacoma and Alabama for fiscal 2019 as it banks on the continued strength of the US housing market, which accounts for the bulk of the group’s earnings.

In the year to March 31, asbestos claims received fell to 577 from 625 the prior year, and the average claim settlement declined from $US327,000 to $US248,000, which was 31 per cent below actuarial estimates, it said. Part of the reason for the decline was a lower number of large mesothelioma claims, coupled with lower average claim sizes for non-large mesothelioma claims.

In very early trade James Hardies shares are 2.3 per cent lower at $21.08.

Commissioning difficulties at start-ups in the US hit margins hard during the year. Commissioning difficulties at start-ups in the US hit margins hard during the year. Photo: CARLA GOTTGENS

Things are doubly exciting here at Markets Live HQ, with news of a competing bid for Fairfax Media, publisher of famous blogs.

Fairfax Media has received an offer from global private equity firm Hellman & Friedman valuing the publisher at up to $2.87 billion.

From global private equity firm Hellman & Friedman, the bid is for a range of $1.225 to $1.25 per share, compared with the TPG consortium proposal of $1.20.

The competing bid values Fairfax between $2.82 billion and $2.87 billion versus the TPG consortium proposal of $2.76 billion.

The board has considered both indicative proposals and will invite both the TPG consortium and Hellman & Friedman to conduct due diligence in order to establish if an acceptable binding transaction can be agreed.

“The Fairfax Board appreciates the support shareholders have demonstrated for Fairfax’s current strategy and the potential separation of the Domain Group,” Fairfax chairman Nick Falloon said.

It’s believed the Hellman & Friedman bid is being led by the private equity firm’s chairman emeritus Brian Powers.

Mr Powers was chairman of Fairfax from 1998 to 2002 and is understood to have had a good working relationship with current chief executive Greg Hywood.

Mr Powers first came to Australia with Hellman & Friedman as part of the Tourang consortium, which included Canadian media baron Conrad Black and Australian media mogul Kerry Packer, to take on Fairfax from receivership in the early 1990s.

Previous to joining Fairfax he spent five years as managing director and chief executive of Mr Packer’s Consolidated Press Holdings and Publishing and Broadcasting Limited.

Mr Falloon, Fairfax’s current chairman, spent 19 years working for Mr Packer between 1982 and 2001. In 2010, Falloon worked with Hellman & Friedman on a failed tilt for Ten Network, which was foiled by Packer.

A bidding war could erupt for Fairfax Media, which publishes the The Australian Financial Review, Sydney Morning Herald ... A bidding war could erupt for Fairfax Media, which publishes the The Australian Financial Review, Sydney Morning Herald and The Age. Photo: Louie Douvis


Here’s the latest news from Washington, with Reuters reporting a short time ago that the US Justice Department has appointed former FBI Director Robert Mueller as special counsel to investigate possible collusion between President Donald Trump’s 2016 campaign team and Russia, as well as alleged Russian interference in the US election.

The move follows a week of turmoil for the White House amid rising demands for an independent probe of alleged Russian efforts to sway the outcome of November’s presidential election in favour of Trump and against Democrat Hillary Clinton.

Pressure has been building on Trump since his firing last week of James Comey, chief of the Federal Bureau of Investigation, who had been leading a federal probe into the matter.

US intelligence agencies said earlier this year that Russia interfered in the US election. Moscow has dismissed the allegations, and the Trump team has denied any collusion with Russia.

“My decision (to appoint a special counsel) is not the finding that crimes have been committed or that any prosecution is warranted. I have made no such determination,” Deputy Attorney General Rod Rosenstein said in a statement.

“I determined that a special counsel is necessary in order for the American people to have full confidence in the outcome,” he said.

Rod Rosenstein, deputy attorney general, has appointed a special counsel to investigate possible Russian interference in ... Rod Rosenstein, deputy attorney general, has appointed a special counsel to investigate possible Russian interference in the election.  Photo: Bloomberg

shares down

Has the Trump trade turned feral? Has the Trump trade turned feral? Photo: Joe Benke

With the level of political uncertainty on the rise, “markets are set to enter risk-off mode in the near-term”, Credit Suisse strategist Hasan Tevfik says.

“The combination of lower bond yields and a more opaque policy outlook will be positive for the defensive/growth companies. But rather than re-entering long positions we think the coming risk-off period provides investors with another opportunity to sell, not buy.”

The US dollar has been selling off of late and bond yields have retraced to their levels at the time of the US election in November.

“It seems clear that a political risk premium is being removed from the euro and instead placed on the US dollar,” Westpac currency strategist Sean Callow said.

Part and parcel of the moves in bonds and the currency have been deflating expectations around the US economy.

“This all comes on the heels of the sharp dive in the US economic surprise index and last week’s further softness in US inflation,” NAB economist David de Garis said. “Now politics is intervening to add more noise into a market already wondering whether the US economy is slowing or not

But until last night equities have mostly ignored all the bad news. Or as ANZ analysts put it, investors were “sleepwalking” into last night’s sell-off.

The big question for investors, the ANZ team says, is how much of the sharemarket’s confident gains “has been due to the (now rapidly unwinding) optimism about Trump’s business-friendly policy agenda, and how much reflects strong fundamentals in the form of solid earnings forecasts?”.

“Hindsight will no doubt be an important input into the analysis in time, but for now the fact that tech and globally focused firms have been outperforming suggests it isn’t just a Trump trade. What is clear is that this political turmoil will not be resolved any time soon.

“While everyone must make their own call on the appropriate level of equities, it does seem likely that the period of unusually low volatility is coming to an end, which would also be typical of the usual seasonal pattern.”

US news

For the first time, a Wall Street that’s been giddy over Donald Trump is starting to ask some hard questions.

From Day 1, markets have rallied, defying what many of the same Wall Street types said would be a disastrous election outcome. Since then, US stocks have hit record after record, driving up shares of Goldman Sachs to JPMorgan Chase to Apple, as investors quickly focused on what his pro-business, tax-cutting agenda would mean for corporate profits.

But the steady drumbeat of bad news may finally be taking its toll.

Overnight, stocks tumbled, Treasuries soared and volatility came roaring back as a series of damaging revelations – from Trump’s disclosure of classified information to Russian officials to reports that he pressed FBI Director James Comey to drop a probe into former National Security Adviser Michael Flynn – prompted many on Wall Street to wonder whether the turbulence that has shattered the market’s calm might be the start of something bigger. It’s also left many to ask whether the market was blinded by its own optimism over Trump’s business-friendly agenda.

“Crazy times, huh?” said Matt Maley, an equity strategist at Miller Tabak & Co. “I’ve talked to a few personal friends and a few customers who I know are supportive of Trump that are saying, boy, this isn’t good.”

Of course, financial markets are often punctuated by bouts of alarm that have unsettled traders during normal times. And up to now, it’s been easy to dismiss the president’s missteps as the price of electing an outsider. But now, the biggest question is whether Trump’s presidency is in trouble.

For some of the world’s largest banks, Trump’s firing of Comey last week was a signal moment. At least two global firms have started mapping out for their clients how financial markets might react to an impeachment – a scenario they still saw as improbable, according to people with knowledge of the matter, who declined to speak publicly because such deliberations are politically sensitive. While their work is just beginning and it’s too early to draw conclusions, the people said, it’s a telling sign of just how serious things have become.

“The political risk has been upped here – things sound more ominous and serious than a week ago,” said Gary Pollack, the head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit.

The S&P 500 Index, which set another all-time high just two days ago, was routed in the worst selloff in eight months. The dollar fell a sixth day, while yields on 10-year Treasuries tumbled by the most since the day after the Brexit vote.

The firing of FBI Director Comey may have been a 'signal moment'. The firing of FBI Director Comey may have been a ‘signal moment’. Photo: AP Back to top