An index of Asian shares retreated while equity futures for US stocks rose slightly, indicating shares may bounce back after the S&P 500 fell more than 2% Monday. A gauge of the greenback steadied in early trading, after weakening to a 15-month low. Gold jumped to another record on haven demand.
Trump’s assurances that tariff talks were progressing did little to lift optimism as concerns mount he may be preparing to fire Powell for refusing to cut interest rates faster. The mood on Wall Street has turned from optimism to a ‘Sell America’ mode as Trump upends a global trade order by ratcheting up tariffs to the highest level in a century, a move that economists have said will boost inflation and push the US into a recession.
“The crisis of confidence in US markets is deepening as Trump’s policies shake up, possibly break, the global economic order,” wrote Kyle Rodda, senior market analyst at Capital.com.
The president took to Truth Social Monday, amping up the pressure on the Fed chair insisting there was “virtually” no inflation and it was time for “preemptive cuts.” The last reading of the Fed’s preferred inflation gauge remains above the central bank’s target, and there will be a new readout next week.
National Economic Council Director Kevin Hassett said on Friday that Trump is studying whether he’s able to fire Powell. The comments raised new questions about whether the Fed can maintain its longstanding independence with the president increasingly venting his dissatisfaction that the central bank hasn’t moved faster to lower interest rates. “Were Powell to be fired, the initial reaction would be a huge injection of volatility into financial markets, and the most dramatic rush to the exit from US assets that it is possible to imagine,” said Michael Brown, senior research strategist at Pepperstone. “Not only is the independence of the Fed clearly under threat, but the prospect of de-dollarization and a move away from US hegemony is an increasingly realistic one.”Trump’s tirades against the have forced a reappraisal of the assets fundamental to US economic dominance. The dollar and Treasury bonds, traditional havens at times of stress, suddenly look much less appealing.
Concerns are also being expressed by hedge fund elites. Paul Singer, founder of Elliott Investment Management, warned recently at a private event in Abu Dhabi that the US dollar might lose its reserve currency status, according to people present.
Meanwhile, Bank of Japan officials see little need to change their existing stance of gradually raising interest rates for now despite uncertainties stemming from US tariffs, according to people familiar with the matter.
