European and US stocks fall as dollar hits 14-year high

Donald Trump was again the focus of the markets on Wednesday, with US and European stocks softer and the dollar hitting a 14-year high, as investors reined in bets that the US president-elect's pledge of infrastructure spending and tax cuts would accelerate inflation.

After rallying early in the morning, European equities finished down, with the FTSE 100 in London, the Dax in Frankfurt and the Cac 40 in Paris all ending in the red.

The Iseq was one of the worst performers, slipping 1.3 per cent. Building materials group CRH dropped 2.2 per cent to €31.50 for its second consecutive fall this week as its post-Trump surge evaporated. The company is seen to be in line to benefit if the US president-elect follows through on his campaign promises to boost infrastructure spending.

Ryanair and Bank of Ireland were also among the fallers on the Iseq as airline and financial stocks had a weak day. "It felt like a risk-off day on markets today," said one Dublin-based trader.

In New York the S&P 500 dipped as investors looked warily at a continuation of the “Trumpflation trade”. That helped arrest a climb in bond yields, in the US at least. The 10-year US Treasury yield, which moves opposite to the note’s price, eased back to 2.21 per cent after it approached 2.30 per cent earlier in the day, close to its high of the year.

German bunds

Equivalent maturity German bunds were down 1 basis point to 0.29 per cent, but lower-rated debt, particularly from southern Europe, suffered another sell-off as the markets mulled how higher inflation would affect

European Central Bank

policy.

Italian and Spanish bond yields rose 7 to 9 basis points and Portuguese government bond yields hit their highest levels since February at one stage, rising 17 basis points to 3.7 per cent.

Irish10-year yields also ticked up, but only very slightly, reaching 0.95 per cent.

"It's scary that the Portuguese bonds are the worst performers by a large margin despite the positive growth data from Tuesday," said Commerzbank strategist David Schnautz.

Portuguese growth accelerated sharply in the third quarter, the Portuguese National Statistics Institute said on Tuesday.

Sterling was also steady against the dollar at $1.2457 after data showed the UK unemployment rate fell to a fresh 11-year low. Against the euro, sterling was trading close to 86p. – (Copyright The Financial Times Limited 2016, Reuters)