(Bloomberg) -- Brazilian equities plunged 10 percent before being halted as political crisis gripped the nation. Losses in U.S. stocks were muted and the dollar rose for the first time in seven days as investors assessed the turmoil in Washington.
The S&P 500 Index retreated 0.2 percent, with fresh revelations about undisclosed contacts between Donald Trump’s campaign and the Kremlin adding to concern about the administration’s policy agenda. Treasury yields edged lower, touching the lowest in a month, while crude slumped the most in two weeks. The dollar benefited from weakness in emerging-market currencies as political turmoil in Brazil added to the chaos in Washington. The Ibovespa was halted after the plunge triggered a circuit breaker.
As the confusion surrounding Trump threatens to derail the policy agenda that helped push global equities to records as recently as Tuesday, a gauge of U.S. stock volatility surged the most since the U.K. voted to leave the European Union last June. Many of the trades sparked by the president’s November election have now reversed, with the dollar all but erasing its post-election rally.
“The market will revert to much higher volatility and this could be the start of it,” said Richard Haworth, chief investment officer of 36 South Capital Advisors, a London-based hedge fund which bets on rising price swings. “The sharp move this week reflects how short volatility the market was -- how complacent.”
The Justice Department Wednesday appointed a special counsel to probe Russia’s role in the 2016 election, deepening a crisis fueled by reports Trump asked FBI Director James Comey in February to halt an investigation before firing him last week.