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Tech sell-off hits US stocks; euro surges on Draghi comments

Wednesday, June 28, 2017 - 06:06

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[NEW YORK] Wall Street stocks took a hit Tuesday as a key vote on President Donald Trump's health care reform was delayed, while the euro rallied following upbeat comments from European Central Bank chief Mario Draghi.

High-flying technology stocks were among the biggest losers in the US, with the Nasdaq finishing down 1.6 per cent, more than the other two leading US stock indices.

The declines came as Republican Senate leaders delayed a vote on a health care overhaul that has been a key part of Mr Trump's agenda and seen as a precursor to tax reform.

The International Monetary Fund cut its 2017 and 2018 US growth projections due to lack of details on Mr Trump's economic plans. The fund now sees US growth in 2017 and 2018 at 2.1 per cent, down from 2.3 per cent and 2.5 per cent previously forecast.

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Equity markets in Paris and Frankfurt also retreated as the euro surged against the US dollar and other leading currencies.

Mr Draghi, addressing a central bank forum in Portugal, said the European Union is experiencing a newfound confidence that could unlock demand and investment.

"Today, things have changed. Political winds are becoming tailwinds. There is newfound confidence in the reform process, and newfound support for European cohesion, which could help unleash pent-up demand and investment," he said.

Mr Draghi cautioned against a change in the eurozone's expansionary monetary policy stance, but analysts said the speech was more hawkish than expected.

"While Draghi is among the more dovish policy makers at the central bank, there has been persistent speculation that the ECB will announce further reductions in asset purchases later this year - and a more positive assessment of the economy from the president may suggest he is willing to back it," said Oanda analyst Craig Erlam.

Joe Manimbo, senior market analyst at Western Union Business Solutions, said, "Mr Draghi played up economic prospects and played down cooler inflation, potentially setting the stage for bankers to upgrade their policy stance to neutral in the months ahead."

Among individual companies, shares of Google-parent Alphabet lost 2.6 per cent after the EU hit the search engine with a 2.4-billion-euro (S$3.78 billion) fine for illegally favouring its own shopping service in its results. Google said it is considering an appeal.

Aluminum company Arconic slumped 9 per cent, tumbling for a second straight day on concerns about the role of the cladding in a catastrophic London high-rise fire.

AFP

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