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As global stocks continue to decline for their eighth-straight day, US President Donald Trump attacked America's independent central bank the Federal Reserve, saying it's "the only problem our economy has".
Key points:
- The US Federal Reserve is monitoring market selloffs that may spark another economic crisis
- Mr Trump has repeatedly attacked the Reserve, which is an independent body
- The S&P 500 is on track for its biggest decline since the Great Depression
Investors, also facing the likelihood of a prolonged US government shutdown, fled to the relative safety of bonds and gold during the first day of a week of trading shortened by the Christmas holiday, even after Mr Trump's Treasury secretary responded to an ongoing selloff by calling top US bankers on Sunday and making plans to convene a group of officials called the "Plunge Protection Team".
"There are a whole number of factors that have triggered this latest risk-off climate, including the Fed's very modest deviation from its [rate increase] plan and the government shutdown in the United States," economist Philip Shaw said.
S&P 500 on track for biggest decline since Great Depression
The Standard & Poor's 500 index slid 2.7 per cent to 2,351.10 and is on pace for its biggest percentage decline in December since the Great Depression.
The benchmark index is now down 19.8 per cent from its peak on September 20, close to the 20 per cent 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 2.9 per cent to 21,792.20.
The Nasdaq skidded 2.2 per cent to 6,192.92. It has fallen nearly 22 per cent from an August 29 high.
On Sunday, Treasury Secretary Steven 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.
MSCI's world equity index, which tracks shares in 47 countries, was 0.59 per cent lower and down almost 7 per cent over the past eight sessions.
The index touched its lowest since early 2017.
The US Senate has been unable to break an impasse over Mr Trump's demand for funds for a wall on the border with Mexico, and a senior official said the shutdown could continue into January.
"We may get some clarity on several factors in early 2019 starting with a clearer line of sight on the prospect for a resolution in US-China trade dispute, but until there are some nerves flying around," said Mr Shaw.
Trump tweets Fed 'does not have a feel for the market'
Mr Trump on Monday blasted America's independent central bank saying "the Fed is the country's only economic problem".
"The Fed is like a powerful golfer who can't score because he has no touch — he can't putt!" Mr Trump said in a tweet.
On Wall Street, stocks had already been down but intensified their fall after Mr Trump's tweet.
Markets are facing their worst month in a decade over fears about a US trade war with China, a slowing global economy and chaos in the White House.
By the close of a holiday-shortened trading session, the Dow Jones Industrial Average had sunk 653 points for the day — 2.9 per cent.
Reports have also surfaced that say that Mr Trump has privately discussed firing Federal Reserve chairman Jerome Powell.
Mr Mnuchin has denied the reports.
US stocks followed broad indexes in Europe and Asia lower on Monday morning, with markets in Germany and Italy closed and trading volumes small.
"Markets [are] still under pressure from last week's more hawkish Fed update, exacerbating fears about slowing growth and more expensive refinancing following years of stimulus," said Mike van Dulken, head of research at Accendo Markets.
The political uncertainty has only added to the air of risk aversion.
Benchmark 10-year Treasury notes were last 5/32 higher in price, yielding 2.7739 per cent.
The gap between two and 10-year yields has shrunk to 0.14 percentage points, a flattening of the curve that has sometimes heralded coming recessions in the past.
"Many of the financial and economic indicators that turn first around business cycle peaks are now flashing red in advanced economies," economist Simon MacAdam said.
"This is consistent with our view that the recent loss of momentum in the world economy will develop into a more severe slowdown in 2019."
ABC/Reuters
Topics: economic-trends, donald-trump, banking, markets, world-politics, united-states
First posted