Stock markets around the world remained under pressure Monday after U.S. Treasury Secretary Steven Mnuchin called the CEOs of six major banks Sunday in an apparent attempt to reassure jittery financial markets — but ended up only stoking investor fears.
In thin trading on Christmas Eve, the Dow Jones Industrial Average was off more than 400 points, or more than two per cent, dipping below the 22,000 level for the first time in 15 months.
The broader S&P 500 was down almost one per cent at 2,398 while the technology-focused Nasdaq was also about one per cent lower at 6,247.
Canadian and U.S. markets close at 1 p.m. ET Monday to mark Christmas Eve.
U.S. stock markets have had their worst month in a decade as investors worry about growth prospects in the midst of an escalating global trade war. The gloom prompted Mnuchin to reach out to the chief executives of major U.S. banks to confirm they have ample money to finance all their normal operations — even though there haven’t been any serious liquidity concerns rattling the market.
Today I convened individual calls with the CEOs of the nation’s six largest banks. See attached statement. <a href=”https://t.co/YzuSamMyeT”>pic.twitter.com/YzuSamMyeT</a>
—@stevenmnuchin1
The move was meant to soothe investor fears, but seems to have had the opposite effect.
“Reports of Steve Mnuchin meeting with decision-makers will not provide much Christmas cheer,” said Chris Beauchamp, chief market analyst at IG.
“Mnuchin is most likely worried about his job, but everyone else will draw the conclusion that there is perhaps much more to worry about.”
A cracked Christmas ornament with the New York Stock Exchange logo hangs from the exchange’s Christmas tree. U.S. stocks are on track for their worst month in a decade. (Mike Segar/Reuters)
“Mnuchin attempted some damage control,” Win Thin, global head of currency strategy at Brown Brothers Harriman, said in a note, adding that the move could backfire.
“Yes, markets have been worried about recession, [but] until this weekend, however, markets were not that concerned about liquidity or clearance issues. And with markets on edge, the last thing they needed was another issue to worry about,” Thin said.
The U.S. central bank, the Federal Reserve, hiked its key interest rate this month, and gave every indication that it plans to do so two more times. That also hasn’t helped stocks, as higher rates make it more expensive to borrow to invest.
Mark Grant, chief global strategist of B. Riley FBR Inc., blamed the Fed, “as they raise rates at exactly the same time that they point out that the economy is shrinking.
“In my opinion, they have made a tremendous error in judgment. They are paying no attention, at all, to our declining economic conditions, as they create liquidity issues. Absolute folly, in my estimation.”
U.S President Donald Trump seemed to agree. He has saidmore than once he would rather see rates stay low to encourage a stronger economy, ignoring the long established principle that the Federal Reserve sets it monetary policy independent of any political interference.
The president seemed to blame the Fed for the sell off on Monday, telling followers in a tweet that central bankers “don’t have a feel for the market.”
The only problem our economy has is the Fed. They don’t have a feel for the Market, they don’t understand necessary Trade Wars or Strong Dollars or even Democrat Shutdowns over Borders. The Fed is like a powerful golfer who can’t score because he has no touch – he can’t putt!
—@realDonaldTrump
It’s not just stocks that have taken a beating recently. Oil fell to $44.55 US a barrel on Monday. After briefly topping $75 a barrel in October, the U.S. oil benchmark West Texas Intermediate has slumped steadily lower on growth concerns.
The gloom in oil has been bad news for the TSX too, as the TSX slumped to its lowest level in more than two years at 13,875 on Monday, off 60 points on the day and down by more than 16 per cent since July . That’s the lowest Canada’s benchmark stock index has traded since the summer of 2016.
The selloff wasn’t limited to North America. France’s CAC 40 was down 1.5 per cent at 4,626.39, while the FTSE 100 index of leading British shares fell 0.5 per cent to 6,685.99. Germany’s DAX was closed.