FTSE 100 down after US stocks slump
The FTSE 100 opened seven points down on Tuesday morning, following a major US market slump on Bank Holiday Monday.
US stock markets took another hit on Monday, with the S&P 500 closing down 2.38 per cent – at 5,158 – while the Nasdaq fell 2.5 per cent and and Dow Jones slumped 2.48 per cent.
This latest stock market dip came as Trump doubled down on his attacks on Federal Reserve chair Jerome Powell, who the US President slammed as “a major loser” whose removal “cannot come soon enough.”
The dollar fell to a three-year low on Monday – with sterling at $1.34 and the euro at $1.15 – as investors weighed the severity of threats by President Donald Trump against the Federal Reserve.
The DXY index, which tracks the US currency against a basket of foreign currencies, was down over one per cent, falling to 97.93, the lowest since March 2022.
The dollar has tumbled since Trump’s inauguration and the escalating trade war triggered by the President’s erratic tariff agenda has worsened the currency’s fate.
Jerome Powell, chair of the Federal Reserve, has found himself in Trump’s firing line amid signs the White House was looking to appoint blame for recent market turmoil.
The President told reporters in the Oval office last week: “If we had a Fed Chairman that understood what he was doing, interest rates would be coming down… he should bring them down.”
Trump added in a post on Truth Social that Powell was “always TOO LATE AND WRONG,” adding he “should have lowered interest rates, like the [European Central Bank], long ago, but he should certainly lower them now.”
He posted on Thursday that “Powell’s termination cannot come fast enough”, hinting that the White House wants more direct control over monetary policy, which has been set independently since 1951.
Fed stuck between dual-mandate in tariff fallout
Trump first appointed Powell to the role during his first administration in 2018.
The Fed chair said the President’s tariff agenda is unlike anything in modern history.
“These are very fundamental policy changes,” Powell told the Economic Club of Chicago.
“There isn’t a modern experience of how to think about this.”
The gilt-yields between five year US Treasuries and 30 years spiked rapidly on the back of Trump’s comments, as fears that Powell’s firing would worsen economic instability.
Powell expressed concerns about Trump’s erratic tariff policy last Wednesday, warning the Fed might find itself in a “challenging scenario in which our dual-mandate goals are in tension.”
The central bank is tasked with ensuring stable prices and full employment across the country.
Economists have also begun to raise the alarm on the waning condition of the dollar.
Jonas Goltermann, deputy chief markets economist at Capital Economics, warned the worst case scenario was “no longer unthinkable”.
He added it was “hard to see” the dollar scraping back losses without a reduction in US policy uncertainty.
Michael Brown, senior research strategist at Pepperstone said there was a risk “of moving away from a decades-long period of dollar and US hegemony”.