Monday 16 September 2019

World markets take a tumble after president's attack on Fed

Firefighting: US Treasury Secretary Steven Mnuchin tried to calm markets with phone calls to big banks. Photo: REUTERS
Firefighting: US Treasury Secretary Steven Mnuchin tried to calm markets with phone calls to big banks. Photo: REUTERS

Joe McDonald in Beijing

Japanese stocks plunged yesterday and other Asian markets declined following heavy Wall Street losses triggered by President Donald Trump's criticism of the US central bank.

The Nikkei 225 fell by an unusually wide margin of 5pc to 19,155.14. The Shanghai Composite Index ended off 0.9pc at 2,504.82 after being down as much as 2.3pc at midday. Benchmarks in Thailand and Taiwan also declined.

Markets in Europe, Hong Kong, Australia and South Korea were closed for Christmas Day. Wall Street indexes fell more than 2pc on Christmas Eve after Mr Trump said on Twitter the Federal Reserve was the US economy's "only problem".

Efforts by Treasury Secretary Steven Mnuchin to calm investor fears only seemed to make matters worse.

US stocks are on track for their worst December in almost 90 years, since 1931 during the Great Depression.

Shanghai is down almost 25pc this year. Tokyo, Hong Kong and other markets are on track to end 2018 down more than 10pc.

Markets have been roiled by concerns about a slowing global economy, the US-Chinese tariff battle and another interest rate increase by the Fed.

Mr Trump's Monday morning tweet heightened fears about the economy being destabilised by a president who wants control over the Fed.

Its board members are nominated by the president but make decisions independently of the White House. The board's chairman, Jerome Powell, was nominated by Mr Trump last year.

"The only problem our economy has is the Fed," the president said on Twitter. "They don't have a feel for the Market, they don't understand necessary Trade Wars or Strong Dollars or even Democrat Shutdowns over Borders. The Fed is like a powerful golfer who can't score because he has no touch - he can't putt!"

The Standard & Poor's 500 index slid 2.7pc. The benchmark index is down 19.8pc from its peak on September 20, close to the 20pc drop that would officially mean the end of the longest bull market for stocks in modern history - a run of nearly 10 years.

The Dow Jones Industrial Average sank 2.9pc, while the Nasdaq skidded 2.2pc.

On Sunday, Mr Mnuchin made a round of calls to the heads of the six largest US banks, but the move only raised new concerns about the economy.

Most economists expect US economic growth to slow in 2019, not slide into a full-blown recession. But the president has voiced his anger over the Fed's decision to raise its key short-term rate four times in 2018. That is intended to prevent the economy from overheating.

Technology stocks, health care companies and banks took some of the heaviest losses in Monday's sell-off. Wells Fargo slid 3.4pc, Microsoft 4.2pc and Johnson & Johnson 4.1pc.

US markets reopen today.

Irish Independent

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