Global Stocks Mixed as Trump Urges Fed to Slash Rates by “At Least 100 Basis Points”
Global stocks traded mixed-to-higher on Tuesday, as investors reacted to President Trump’s call for deeper interest-rate cuts “and perhaps some quantitative easing as well.”
A decade removed from the financial crisis, major economies are already gearing up for another era of ultra-loose monetary policy. The Federal Reserve, Reserve Bank of New Zealand, Reserve Bank of Australia and soon the European Central Bank are all embarking on a new round of stimulus measures in one form or another.
After a strong start to the week for Wall Street, Asian and European markets diverged on Tuesday. Japan’s benchmark Nikkei 225 index rose 0.6% to 20,677.22. China’s Shanghai Shenzhen CSI 300 Index fell 0.1% to 3,787.83. Hong Kong’s Hang Seng Index closed down 0.2% at 26,231.54.
The Eurozone benchmark Euro Stoxx 50 Pr was flat at the time of writing. The U.K.’s FTSE 100 climbed 0.4%. Germany’s DAX Index flat-lined.
U.S. stock futures also began to waver after 7:00 a.m. ET, with the S&P 500 mini flat-lining and the Dow 30 contract slipping 6 points. The major U.S. stock indexes put up strong gains on Monday, extending last week’s relief rally.
Trump Urges Rate Cuts
President Trump believes the Federal Reserve is hampering U.S. productivity and growth by keeping rates higher than comparable economies around the world. On Monday, he stepped up his assault on the Fed by urging policymakers to cut rates by “at least 100 basis points.”
“Our Economy is very strong, despite the horrendous lack of vision by Jay Powell and the Fed, but the Democrats are trying to ‘will’ the Economy to be bad for purposes of the 2020 Election. Very Selfish! Our dollar is so strong that it is sadly hurting other parts of the world. The Fed Rate, over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well. If that happened, our Economy would be even better, and the World Economy would be greatly and quickly enhanced-good for everyone!”
The call for even lower interest rates is concerning because: (1) the federal funds rate is still very low, (2) the U.S. economy is supposedly doing very well and (3) cheaper credit will only exacerbate the debt spiral.
As for the Fed, it is widely expected to cut interest rates by a quarter point in September. According to the latest CME Fed Fund futures prices, the chance of a September rate cut is 95%.
Jackson Hole Symposium
Central bankers from around the world will converge on Jackson Hole, Wyoming later this week for the annual Jackson Hole Symposium. As Bloomberg reports, Fed Chair Jerome Powell will likely use the venue to ready markets for another interest rate cut.
Powell is set to deliver a public address on Friday in what is likely to be a “tough communication challenge for the Fed chairman,” according to CNBC.
Ahead of the Jackson Hole summit, investors will have the opportunity to review the minutes of last month’s Federal Open Market Committee (FOMC) meeting where officials voted to cut interest rates. Although the FOMC swiftly voted to cut interest rates, the presence of two dissenters – Esther George and Eric Rosengren – suggested there was more disagreement about the path of monetary policy.
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