The heavy selloff came after The New York Times reported that U.S. President Donald Trump had asked former Federal Bureau of Investigations Director James Comey to drop an investigation between his inner circle and the Russians (http://www.marketwatch.com/story/trump-asked-comey-to-drop-flynn-investigation-report-2017-05-16).
Small-company stocks fell more than the rest of the market.
US gold futures for June delivery settled down 0.5 percent at $1,252.80. Expectations for a rate increase by the Fed had eased in the wake of lackluster data on USA inflation and growth in recent weeks, as well as news about President Donald Trump's firing of FBI Director James Comey and possible ties between members of his administration and Russian Federation. The U.S. dollar index has now erased its post-election gains.
The Justice Department on Wednesday named former Federal Bureau of Investigation chief Robert Mueller as special counsel to investigate alleged Russian interference in the 2016 USA election and possible collusion between Trump's campaign and Moscow.
The U.S. dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, fell 0.13% to 97.97. Some of the largest individual stock moves were spurred by fresh M&A action, with shares in Berendsen soaring almost 27 per cent after French laundry firm Elis made a $2.6 billion offer for the British rival.
Bespoke Investment Group notes that the Eurozone Economic Surprise Index is higher than 96% of all readings over the last five years, while the U.S. Economic Surprise Index is lower than 84% of all readings over the same period. Hong Kong's Hang Seng index slipped 0.2 percent to 25,293.63.
The U.S. dollar bought 110.94 Japanese yen, lower than 113.02 yen of the previous session.
In the unlikely event that Trump is impeached, the Vice President, Mike Pence, would become acting president, meaning the Republican Party would still be pursuing much of Trump's economic policies. South Korea's Kospi also extends its losses from geopolitical tremors from North Korea's nuclear exercise; it manages to shed 0.15% at 2291.53, or 3.52 points.
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The pound rose back to the top of the past month's range versus the dollar, bouncing to as high as $1.2991 as risk aversion intensified in the early USA session.
Spot gold dropped 1.0 percent to $1,247.36 an ounce.
"When you are at these valuations, the market has to reassess whether or not the agenda is actually going to be implemented", said Quincy Krosby, market strategist at Prudential Financial.
There are a lot of doubts rising these days from the investors end against the Presidential abilities of Donald Trump to shove through the aggressive motivational incentive program which could be very beneficial to the investors.
Brent oil futures dipped back to $52.05 a barrel after hitting a two-week high overnight on the back of an ongoing effort by OPEC to cut production.
The dollar index rose 0.02 percent, with the euro down 0.29 percent to $1.1126.
Across the Channel there's little for the markets to consider on the stats front, which will likely leave the Euro exposed following Wednesday's 0.69% gain to $1.1159 by the close, with the Euro now down 0.21% at $1.1136, the Dollar trying to claw back Wednesday's sell-off.
UK's benchmark FTSE 100 closed down by 0.9 percent, the pan-European FTSEurofirst 300 ended the day down by 0.51 percent, Germany's Dax ended down by 0.3 percent, France's CAC finished the day down by 0.6 percent. USA crude prices were up 1.1 percent at $52.21 a barrel after of US crude inventory data.