As stocks fluctuated and the dollar declined, bullion set yet another milestone on Tuesday. Concerns regarding the independence of the central bank were heightened by US President Donald Trump’s most recent attack on Federal Reserve Chairman Jerome Powell.
With the US tariff blitz still causing ructions on global trading floors, investors are also coping with the extra worry that the US president would try to remove the country’s top banker.
Last week, Trump attacked Powell for warning that the sweeping taxes will probably cause inflation to spike again, claiming that his “termination cannot come fast enough” and that “I’m not happy with him.” I let him know, and trust me, he will leave quickly if I want him to.
The Republican tycoon sent shivers through markets Monday by branding the Fed chairman a “major loser” and “Mr Too Late,” and urging him once more to make preemptive interest rate cuts.
He claimed there was “virtually” no inflation on his Truth Social platform, citing the European Central Bank’s several cuts and asserting that food and energy prices were significantly lower.
Concerns have been heightened by Trump’s outbursts, as top economic adviser Kevin Hassett stated Friday that the president was thinking about firing Powell.
All three major indices ended Monday’s trading day down almost 2.5% as panicked Wall Street investors once again sold US assets.
“The market reacted little to the first volley on Thursday, but the’sell America trade’ has intensified with Monday’s second barrage,” stated Tapas Strickland of National Australia Bank.
“The jousting highlights the loss of US exceptionalism and the very real policy risk for investors, regardless of whether President Trump is legally able and willing to take action against the US Fed.”
Gold touched yet another record above $3,500 due to the rush for protection, and the dollar was still under pressure from its major peers even if it had stabilized from the previous day’s selloff.
On the first full day of work following the Easter vacation, stocks fluctuated between gains and losses.
While Hong Kong, Shanghai, Singapore, Mumbai, and Jakarta increased, Tokyo, Sydney, Seoul, Wellington, Taipei, Manila, and Bangkok declined.”If Powell were fired, the initial reaction would be a huge injection of volatility into financial markets, and the most dramatic rush to the exit from US assets that it is possible to imagine,” said Pepperstone strategist Michael Brown. “Lower, much lower, equities; Treasuries sold across the board; and, the dollar falling off a cliff.” London barely moved if Trump tried to fire the Fed boss, while Paris and Frankfurt edged down.
“Any sign of the longstanding, independent nature of the Fed coming under threat would see investors across the globe selling every single US-based asset that they have, and also poses the genuinely scary prospect of upending the entire way in which the global financial system operates.”
– Key figures –
Tokyo – Nikkei 225: DOWN 0.2 percent at 34,220.60 (close)
Hong Kong – Hang Seng Index: UP 0.6 percent at 21,527.95
Shanghai – Composite: UP 0.3 percent at 3,299.76 (close)
London – FTSE 100: FLAT at 8,275.99
Euro/dollar: DOWN at $1.1500 from $1.1510 on Monday
Pound/dollar: UP $1.3389 at $1.3377
Dollar/yen: DOWN at 140.38 yen from 140.89 yen
Euro/pound: DOWN at 85.88 pence from 86.03 pence
West Texas Intermediate: UP 1.1 percent at $63.78 per barrel
Brent North Sea Crude: UP 1.0 percent at $66.95 per barrel
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