Trump takes aim at 'crazy' Fed as markets sink following US slump

Thursday 11th October 2018 14:00 BST

European bourses continued to feel pain from the rout in values on Thursday after steep losses were witnessed across the Atlantic.

The president took aim at the Federal Reserve, led by Jerome Powell whom he personally chose to lead the bank, after the Dow Jones Industrial Average fell 3%, or more than 800 points, in Wednesday trading - its worst drop in eight months.

The S&P 500 was also down 3% while the tech-heavy Nasdaq lost 4%.

The US slump, which amounted to a market value loss of over £800bn, had followed shallower falls across much of Europe.

Asia responded to the US market moves by falling in similar fashion on Thursday with China's Shanghai Composite closing at its lowest level for four years.

Japan's Nikkei and the Hang Seng in Hong Kong were down by up to 4%.

The FTSE 100 opened 1.5% lower - hovering just below the 7050 point level by lunchtime - following a 1.3% decline on Wednesday.

Other main European markets were down by similar levels.

:: Q&A: The global stock market sell-off explained

There are a slew of worries for investors which have been building in recent weeks.

They include the US trade war with China and its potential impact on global growth, while rising bond yields have diverted attention from equities - stocks - which have been offering the most attractive returns for years because central bank stimulus had flooded markets with cheap money.

Those financial crisis-inspired programmes - such as quantitative easing - are now ending and the Fed has raised US interest rates three times already this year - raising borrowing costs - and could add a fourth hike by the end of 2018.

Strong economic data and a positive outlook from Fed officials have led to a sell-off in US Treasury bonds, particularly longer-term ones, sparking concerns about even higher interest rates.

Ahead of a campaign rally for the US mid-term elections next month, Trump told reporters: "I think the Fed is making a mistake."

He described the path of rate increases - most recently to a level of 2-2.25% - as "crazy", adding that the stock market reaction was the "correction that we've been waiting for".

Stock market falls do not sing in tune with his pre-election narrative as he has used recent record stock market values as proof of economic achievements by his administration.

Tech and luxury stocks have been among those to feel the worst pain in the sell-off. Amazon and Microsoft lost 5% of their market value on Wednesday while Apple and Facebook shed 4%.

Naeem Aslam, chief market analyst at Think Markets, said: "We have not experienced anything like this since Brexit and if you look at the Nasdaq, it becomes clear that the sell-off was actually triggered by the technology stock."

Jasper Lawler, head of research at London Capital Group, offered this explanation: "The bloodbath for global equities comes as investors adjust to a world of higher US interest rates and US treasury yields.

"As concerns increase over higher interest rates dampening growth, investors are evolving their trading strategies accordingly.

"Plays into risker growth stocks, such as tech stocks on the Nasdaq, are being replaced with more conservative strategies such as moves into higher yielding defensives.

"To say risk appetite has taken a hit would be an understatement!"

Now On Air
More Music on Coast FM
More music on Coast FM