US stocks had their worst day in eight months as the House of Representatives oversight committee set a hearing for 24 May to investigate whether Trump interfered in an FBI probe.
The S&P 500 fell 1.8 per cent to 2,357 while the Dow Jones Industrial Average dropped more than 370 points.
The S&P 500 financial sector sank three per cent, led by a 5.9 per cent drop in Bank of America and a 3.8 loss for JP Morgan. Goldman Sachs was the biggest drag on the Dow as shares fell 5.27 per cent.
The dollar also dropped, erasing all of the gains since Trump’s election victory in November while the so-called fear gauge, the Vix index, jumped 15.34 per cent as calls for Trump’s impeachment grew louder.
The tumultuous day was set off by reports of a memo by former FBI chief James Comey that suggested Trump asked him to drop the FBI investigation of Michael Flynn, his former national security adviser.
A defiant Trump complained about the media coverage of the latest in a string of scandals, saying no politician in history “has been treated worse or more unfairly”.
The latest news was a tipping point for many politicians on both sides of the political divide. It follows Trump’s abrupt sacking of Comey last week and an admission that he disclosed classified information to Russia’s foreign minister.
Republican representative Justin Amash suggested an impeachment would be warranted if the allegations that Trump interfered with an FBI investigation were true, and Democratic congressman Al Green called for Trump’s impeachment on the floor of the House of Representatives.
“The President must be impeached,” Green said.
Meanwhile, Democrats said they would try to force a vote in the House to form an independent commission to investigate possible Russian influence on the 2016 election.
And late last night some of them welcomed the Department of Justice move to appoint former FBI boss Robert Mueller to lead a probe into the Trump-Russian connection in the race for the White House.
Stocks were also hit on this side of the pond, the FTSE 100 breaking a nine-day winning run, and the top German and French indices closing down more than one per cent lower. The pan-European Stoxx 600 fell 1.2 per cent, its biggest one-day loss since end September, while Eurozone blue chips fell 1.6 per cent.
Banks and construction sector stocks were the biggest sectoral fallers, both down around two per cent.
Despite the heavy falls, European benchmarks remain near recent highs, having risen sharply on the back of an economic recovery.