S&P, Dow set for worst day in months on Trump turmoil

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Early Asian markets such as Australia .AXJO are set to lead the region higher, with metal and oil shares in focus. The U.S. currency now sits at its lowest level since the day of Trump's shock win, a retracement some blame on perceptions his legislative agenda faces deeper challenges.

All three major USA stock indexes were down more than 1 percent. S&P 500 e-mini futures dropped as much as 0.7 percent overnight before paring the slide to 0.4 percent 90 minutes before the open.

The turmoil engulfing President Donald Trump's administration spilled into financial markets as US stocks fell the most since March, measures of volatility spiked higher and Treasuries rallied with gold.

In currencies, the greenback =USD nursed deep losses after a weak USA manufacturing report trimmed expectations of a US rate increase next month, a key factor behind the dollar's gains in recent weeks.

Nine of the 11 major S&P 500 sectors fell with the only gain from utilities .SPLRCU and real estate .SPLRCR , defensive sectors with predictable if slow growth and high dividends.

At 10:46 a.m. ET (1446 GMT), the Dow Jones Industrial Average was down 234.47 points, or 1.12 percent, at 20,745.28, the S&P 500 was down 24.18 points, or 1.01 percent, at 2,376.49 and the Nasdaq Composite index was down 83.65 points, or 1.36 percent, at 6,086.22. The Swiss franc gained 0.2 percent against the dollar to 0.9838 franc per dollar.

Even here, though, traders have been divided on what is moving the USA currency, with some seeing catalysts beyond politics. "It's registering with more investors that its going to be hard to get back on track with the latest allegations", Michael O'Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.

Analysts said the controversy around Trump has raised fears that he might not last a whole term and that, even if he did, there were too many distractions for him to be able to successfully push through his economic stimulus programme.

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In Europe, Germany's DAX was down by 0.3 percent at 12,768 while the CAC 40 in France fell by 0.4 percent at 5,387.

Oil prices were little changed as traders awaited weekly US inventory data and after Kuwait joined top producers Saudi Arabia and Russian Federation in support of prolonging supply cuts through March 2018 to reduce a global crude glut.

The dollar dropped 0.5 percent to 112.64 yen, slipping further from its highs near 114.40 yen touched last week. The Shanghai Composite Index edged 0.2 percent lower to 3,104.44. The FTSE 100 index of leading British shares was 0.1 percent lower at 7,519 and near all-time highs.

The euro climbed above $1.11 overnight, and hit $1.1122, its highest level since November 9, in early European trading hours.

The 10-year US Treasuries yield US10YT=RR dipped to 2.294 percent, flirting with its lowest level in the past two weeks.

Spot gold added 0.5 percent to $1,236.91 an ounce.

Brent crude was up 1.6 percent at $52.49 per barrel, while US light crude rose 1.4 percent to $49.34. Hong Kong's Hang Seng index slipped 0.2 percent to 25,293.63.