Sharp falls continue
Asia follows Wall St lower as Mnuchin’s market move backfires
Asian markets followed the US with steep falls as investors continued to fret over President Donald Trump’s relations with the Federal Reserve and slowing world growth.
The Nikkei closed down 5% today, its worst finish since April 2017. Indexes in Shanghai, Bangkok and Taiwan were also lower.
The Dow Jones fell more than 653 points (2.91%) on Monday, as it headed for its worst December since 1931 during the Great Depression.
US officials were forced to deny weekend reports that President Trump wanted to oust Federal Reserve chairman Jerome Powell, who was appointed by the president a year ago to replace Janet Yellen. Mr Trump is unhappy at recent rises in interest rates.
US Treasury Secretary Steven Mnuchin’s attempt to calm the markets by contacting the heads of the country’s six biggest banks backfired spectacularly.
Stocks around the world have plummeted in the last month, with the US taking a hammering following a rise in interest rates and continuing tensions over US-China trade talks. Oil prices tumbled more than 6% on Monday to their lowest in over a year.
The Dow Jones has lost 12% this month and amid fears that 2019 could herald a full-blown bear market. The S&P 500 is also poised for its largest loss in any December since the 1930s. Market nervousness also comes amid a partial government shutdown over spending plans.
The FTSE 100 closed on Monday 0.5% (35.18pts) lower at 6,686 in a shortened session, setting a downbeat tone for the final trading days of the year.
In an unusual move Mr Mnuchin said he had spoken to the heads of Bank of America, Citi, Goldman Sachs, JP Morgan Chase, Morgan Stanley and Wells Fargo.
The CEOs assured him they had ample money to finance their normal operations, even though there haven’t been any serious liquidity concerns rattling the market.
“The [bank’s chief executives] confirmed that they have ample liquidity available for lending to consumer, business markets, and all other market operations,” the Treasury said in a statement.
“[Mr Mnuchin] also confirmed that they have not experienced any clearance or margin issues, and that the markets continue to function properly.”
Mr Mnuchin yesterday convened the president’s working group on financial markets, a group that includes Mr Powell and the head of the Securities and Exchange Commission.
The group was created following the stock market crash of October 1987 and is known more commonly as the “plunge protection team”. It also met in 2009 in the wake of the financial crisis.
In London’s final session before Christmas, exchanges group Euronext which is planning a joint venture to launch a Scottish trading market, announced plans to buy the owner of the Oslo stock exchange for €625 million.
Martin Sorrell’s S4 Capital fell back nearly 3% on its first trading day on the main market.
Heading the other way, Whitbread added 1.3% after it said the European Union approved its sale of Costa coffee chain to Coca-Cola Co and announced a £500m share buyback.