US equities tumbled last night, as the FBI probe called President Trump’s credibility into question again. 

That catalysed a new wave of concerns on whether the new administration can deliver on its promises of fiscal stimulus, financial deregulation and tax reform. Apparently, risk assets were facing a headwind of a temporary 'risk-off' sentiment surrounding these uncertainties from the US. The Dow, S&P 500 and Nasdaq index lost 1.14%, 1.24% and 1.83% respectively, registering their largest single-day losses since the election day on 8 November 2016. 

On the other hand, US treasuries, the Japanese yen and gold rose significantly overnight, thanks to the hunt for safety. The gold price broke out above the key resistance level of US$1,240 and is currently trading at around US$1,245. The next resistance level will be the US$1,286 area.

As expectation of a US stimulus plan started to unwind, the treasury curve shifted downwards. The dollar index slumped further to the 99.60 area – close to a two-month low. 

However, that didn’t affect the market’s expectations around Fed policies, at least for now. The probability of June and July rate hikes, according to Bloomberg’s interest rate forecast, fell to 56% and 79% respectively, registering only a slight change from two days ago.

Asian markets opened significantly lower, as risk-off sentiment prevailed. Profit-taking activity is likely to accelerate as most markets have rallied over the last three months, resulting in huge unrealised gains. 

US S&P 500 - Cash

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