European markets followed their American counterparts lower this morning as the fallout from political turmoil in Washington spread.
The FTSE 100, which is heavily exposed to the US economy, dipped by more than 0.6 per cent in the first hour of trading as mining stocks led declines.
The Stoxx 600 index, which measures the performance of companies across Europe, including the UK, fell by 0.54 per cent at the time of writing. France’s Cac 40 fell by 0.44 per cent and the Dax also fell sharply at the open.
Yields on European sovereign debt fell uniformly as investor demand for safer assets increased. German and UK government bond yields, which move inversely to prices, both lost 2.5 basis points at the time of writing.
The poor performance of European assets came after controversy over US President Donald Trump’s handling of a probe into links between Russia and his election campaign spilled over into calls for his impeachment from senior politicians.
US markets plunged yesterday evening to their lowest point in almost a month as Trump’s political troubles mounted, with the S&P 500 losing 1.82 per cent and the Dow Jones Industrial Average losing 373 points.
The administration struggled to contain the damage. The US justice department last night appointed respected former FBI head Robert Mueller as a special counsel to lead an inquiry into potential interference, after pressure had mounted for guarantees of political neutrality.
Trump yesterday complained no politician in history “has been treated worse or more unfairly” by the media after intense scrutiny of his actions in firing James Comey as FBI head. He cited “this Russia thing” as one of the reasons for the move, sparking furious allegations of interference in an independent investigation.
The political turmoil has seen the dollar wipe out all of the gains made since Trump was elected as investors doubt the ability of the President to pass meaningful inflationary policies, such as a big fiscal expansion.