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NEW YORK (Reuters) - Most U.S. and European share indexes fell on Wednesday as concerns over potential delays to President Donald Trump's pro-growth policies again unnerved investors, while safe-haven gold, U.S. Treasuries, and the yen rallied.
The benchmark U.S. S&P 500 stock index briefly hit its lowest level in five weeks, while the FTSEurofirst 300 index of top European shares hit a roughly two-week low as investors increasingly worried about whether Trump would be able to push ahead with his pro-growth policies.
U.S. President Donald Trump and Republican congressional leaders struggled on Wednesday to get enough support in the House of Representatives to win passage of their Obamacare rollback bill. Repealing and replacing Democrat Barack Obama's 2010 Affordable Care Act is a first major test of Trump’s legislative ability and whether he can keep his big promises to business.
RYAN LARSON, HEAD OF U.S. EQUITY TRADING AT RBC GLOBAL ASSET MANAGEMENT IN CHICAGO:
"Most of what we're seeing this morning is uncertainty on the outcome of the (Congressional healthcare legislation) vote tomorrow or if the vote will even happen tomorrow."
"The market was giving Trump some leeway. It was supportive of what the administration was talking about. We're starting to get into a phase where that grace period is coming to an end and what the market wants is to see more walk-the-talk as opposed to talk-the-talk.
"I don't think the market has fully priced that it isn't going to pass tomorrow. If that was the case we would've seen a much stronger continuation of yesterday's move. If it is a no vote or the vote gets pushed or stripped out I do think we'd see a pretty sharp and immediate reaction to the downside."
"I don't think it’s enough to suggest the bull run is done. It’s very much an open case."
MICHAEL ARONE, CHIEF INVESTMENT STRATEGIST AT THE US SPDR BUSINESS AT STATE STREET GLOBAL ADVISORS IN NEW YORK:
“The primary driver continues to be concerns around the timing of the fiscal policy agenda in the U.S. That is the primary driver of market action so far this week at a time when we are passed Dutch election, passed the FOMC meeting, not in earnings season and people feeling a bit better about the French election. We have this kind of singular focus on Washington and having that healthcare bill being legislated is kind of ugly.”
“A lot hinges on tomorrow’s (AHA replacement) vote. Both sides are posturing. You have Trump and Ryan saying that they have the votes to pass healthcare reform, while you have a small faction of the Republican party, the fiscal conservatives who are saying they have the votes to stop it. I think the market could react positively if indeed healthcare reform passes in the House tomorrow. There will be some relief that the fiscal policy agenda is on track.
"But if we don’t get that, I think a correction of 5.0 percent is not unreasonable given how far we’ve come in such a short period of time. If there are further delays in the vote or if they can’t get a bill passed in the House, it will lead folks to conclude that tax reform is further out on the horizon and deregulation and other Trump priorities are being pushed further down the line. It could cause a repricing of assets in the 5.0 percent kind of range.”
CHUCK CARLSON, CHIEF EXECUTIVE OFFICER AT HORIZON INVESTMENT SERVICES IN HAMMOND, INDIANA, CONTRIBUTING EDITOR TO NEWSLETTER DOW THEORY FORECASTS:
"Pullbacks happen in markets. In fact, they’re healthy for markets... You need to take some froth off the table and restore some values to the market. Corrections are part and parcel of all bull markets and they are a necessary evil, so to speak.”
“Do I think this is the beginning of one of those corrections? Yeah, I kind of do.”
“We were kind of seeing a little bit of a foreshadowing of the correction in the major indices by what was going on the in the Dow Jones Transportation Average (which has fallen about 7.0 percent since March 1).
TIM GHRISKEY, CHIEF INVESTMENT OFFICER OF SOLARIS GROUP IN NEW YORK, NEW YORK:
"If a correction continues banks could underperform the market by about 5.0 pct. Relative to history bank stocks are still inexpensive. That lends some support to the group."
"I don't think Trump's agenda will be a total failure. We look at this as short term profit taking and scaling back of time expectations. When we look back we'll see this as a buying opportunity. I don't know if we go lower before this settles out. I wouldn't be surprised. I don't think we go back to Nov. 8 levels. We're just taking off some of the froth."
"There could easily be another downside. We could see this being a 5.0 percent adjustment if the healthcare bill doesn't pass. We'd look at that as a buying opportunity therefore we may not even get that much of a pull back."
JULIAN EMANUEL, EXECUTIVE DIRECTOR OF U.S. EQUITY AND DERIVATIVES STRATEGY AT UBS SECURITIES:
"This is really about the fact that the market is pricing in too much certainty on a number of accounts. Even if you got the positive vote (in Congress on healthcare), there's still the residual knowledge that the agenda will be difficult to get through the Senate. There are other things still on the docket.
"It shows you what a challenge tax reform will be, even if this bill passes tomorrow. So the backdrop becomes - is there too high a degree of certainty priced into earnings and the economy, based on the a legislative agenda that is proving to be difficult.
"While we continue to think (the economy) will grow about 2.0 percent, there is a soft patch in the first quarter that's reasonably unexplained and that's a potential threat to earnings.
"As well oil and credit markets are potentially signaling that there's something there that we don't see yet. The only other indicator that is flashing yellow is bank lending to industry, which has dropped off sharply, at odds with the confidence numbers. There are a lot of reasons to think that whatever the outcome is tomorrow you still need to price in residual higher level of uncertainty."
JACK ABLIN, CHIEF INVESTMENT OFFICER, BMO PRIVATE BANK, CHICAGO:
“The market is using the healthcare bill as a barometer of President Trump’s ability to navigate legislation through Congress and get things enacted into law. It is the first tangible evidence of Trump’s effectiveness with Congress.
“Investors are reevaluating the time it’ll take to pass campaign proposals but also how effective it’ll be, how diluted things become. Investors are assuming the business-friendly programs pass but they’re pushed back in the calendar past August. They haven’t lost faith but they’re losing enthusiasm.”
ANDRE BAKHOS, MANAGING DIRECTOR AT JANLYN CAPITAL LLC IN BERNARDSVILLE, NEW JERSEY:
"You put it all together, there was an overly enthusiastic investors betting on a positive outcome of the Trump administration. They put too much juice into it. Now you are getting some road bumps in healthcare... and now investors are doing a reality check...You have some momentum investors taking some money off the table and tempering that over-enthusiasm that we had been seeing.”
BRIAN DAINGERFIELD, MACRO STRATEGIST, NATWEST MARKETS IN STAMFORD, CONNECTICUT:
"Thursday is the first legislative test of Trumps agenda... so I think the market is looking at it as not only as the first test of the legislative agenda but also his influence on his own party.
“Its probably unfair to take specifics of this bill and apply them to a tax reform package where I think it would be easier to find common ground. After healthcare then key thing is tax reform."
Megan Davies; editing by Clive McKeef