(Bloomberg) – Hourdeux selling Wall Street again on Monday, with longer -term treasury vouchers joining actions and dollar in a deepening collapse, after the rejection by President Donald Trump of the interest rate of Jerome Powell felt a new anxiety among the investors who are already joining with a world trade war.
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Trump’s insurance that tariff talks were progressing did not do much to stop the rout. The S&P 500 and other major American stock market indices have dropped by more than 3% each while an index in dollars has weakened at a hollow of 15 months. The reference to 10 years fell with the yield of almost 4.4%. While investors turned away from American titles, the assets of paradise climbed. Gold jumped to another record, above $ 3,400 per ounce, while the Swiss franc earned more than 1% compared to the dollar.
Weakness has also spread to the American credit market. In derivatives, the cost of protecting a basket of high -quality credit securities against fault has reached the highest in more than a week. Three quality of placement companies planned to sell bonds on Monday, but after seeing the backdrop of the market, two chose to withdraw, and only American Express Co. decided to move forward with a sale.
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The American president went to Truth Social in degeneration of his attack on the Fed chair, insist that there was “practically” no inflation and it was time for “cuts of cuts”. The latest reading of the FED’s favorite inflation gauge remains above the central bank goal, there will be a new reading next week.
The director of the National Economic Council, Kevin Hassett, said on Friday that Trump was studying if he was able to dismiss Powell. The comments have raised new questions on the question of whether the Fed can maintain its long -standing independence with the president more and more dissatisfaction in difficult terms that the central bank has not evolved more quickly towards lower interest rates.
“If Powell was to be dismissed, the initial reaction would be a huge injection of volatility on the financial markets, and the most dramatic rush at the end of the American assets that it is possible to imagine,” said Michael Brown, main research strategist at Pepperstone. “Not only is the independence of the Fed clearly threatened, but the prospect of delollarization and the distance from us hegemony is more and more realistic.”
It is a fear that is echoed by the elites of hedge funds. Paul Singer, founder of Elliott Investment Management, recently warned during a private event in Abu Dhabi that the US dollar could lose its reserve currency status, according to people present.
The risk reprimand of the Fed politicized American monetary policy in a way that the markets find deeply disturbing, said Christopher Wong, a strategist of currencies at Oversea-Chinese Banking Corp.
“Frankly, the dismissal Powell stretches the belief,” said Wong. “If Fed’s credibility is questioned, it could severely erode confidence in the dollar.”
Chicago Fed president Austan Goolsbee warned of efforts to reduce the independence of the Central Bank.
“There is virtual unanimity among economists who monetary independence of political interference – that the Fed or any central bank can do the work it must do – is really important,” Goolsbee said on the face of CBS the nation on Sunday.
Legal researchers say that a president cannot easily reject a president of the Fed, and Powell previously said that he would not resign if Trump asked him.
Trade war
Trump’s price offensive has also remained a weight in the markets in the concerns about a financial crisis on the road.
“The world economy is shaken by an American war against trade, which, in our view, generates an economic shock significant enough to threaten the life of the United States and the global expansion,” wrote Bruce Kasman, chief economist of JPMorgan Chase. “While showing an increased risk of global recession, we also emphasize that this result should not settle immediately.”
The Bloomberg Dollar spot index slipped 0.7% on Monday. Each motto of group of 10 won against the greenback. The leap into the yen weighed on stock market indices in Japan, pushing the Nikkei 225 down 1.3%.
The yen, the euro and the Swiss franc have rallied. The crude WTI fell by more than 2% to less than $ 64 a barrel. European stock markets were still largely closed for a public holiday.
In a sign that investors are shooting investments far from the United States, Deutsche Bank AG said that Chinese customers had reduced some of their treasure titles in favor of European debt. High -quality European obligations, Japanese government and gold bonds are probably the potential choices for investors as an alternatives to treasury bills, said Lillian Tao, head of Chinese macro and world sales of emerging markets to the bank.
Tesla Inc. slipped 7.2%. Wedbush Securities analyst Dan Ives said that the company faces a “red code” when it is preparing to publish income on Tuesday, and that Elon Musk is expected to retreat from work at the Ministry of Government’s efficiency to focus on Tesla.
Some of the main market movements:
Actions
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The S&P 500 fell 3.4% at 2:05 p.m.
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The Nasdaq 100 dropped by 3.6%
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The industrial average of Dow Jones fell 3.3%
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The MSCI global index fell 2.2%
Currency
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The Bloomberg Dollar spot index fell 0.7%
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The euro increased by 1.1% to $ 1,1514
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The British book increased by 0.6% to $ 1,3373
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The Japanese yen increased 1.1% to 140.64 per dollar
Cryptocurrency
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Bitcoin increased by 2% to $ 86,820.92
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Ether dropped by 0.8% to $ 1,576.43
Bonds
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The yield on treasury bills at 10 years has advanced six base points at 4.39%
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The yield in 10 years of Germany has changed little to 2.47%
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The yield in 10 years of Great Britain has changed little at 4.57%
Goods
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West Texas Intermediate Brut fell 2.2% to $ 63.26 a barrel
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Spot gold increased by $ 3,424.74 per ounce
This story was produced with the help of Bloomberg Automation.
– With the help of Dan Wilchins, Ruth Carson, David Finnerty, Catherine Bosley, Joanne Wong and Anand Krishnamoory.
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