A gauge of stocks worldwide posted an eighth straight decline on Dec. 23 amid the Federal Reserve’s ninth interest rate hike since 2015 the U.S. president called them the “only problem our economy has.”
Investors, also facing the likelihood of a prolonged U.S. government shutdown after Congress failed to reach an impasse on budget legislation, fled to the relative safety of bonds and gold during the first day of a week of trading shortened by the Christmas holiday.
Oil prices, meanwhile, tumbled more than 6 percent on Monday to the lowest in over a year.
On Dec. 23, President Donald Trump’s Treasury secretary responded to the ongoing selloff by calling top U.S. bankers and said he would convene a group of officials known as the “Plunge Protection Team.”
“There are a whole number of factors that have triggered this latest risk-off climate, including the Fed’s very modest deviation from its (rate increase) plan and the government shutdown in the United States,” said Investec economist Philip Shaw.
“We may get some clarity on several factors in early 2019, starting with a clearer line of sight on the prospect for a resolution in U.S.-China trade dispute, but until then, there are some nerves.”
MSCI’s world equity index, which tracks shares in 47 countries, was 1.57 percent lower and down 8 percent over the past eight sessions. The index touched its lowest since early 2017.
U.S. stocks have fallen sharply in recent weeks on concerns over slowing economic growth and efforts by the U.S. Federal Reserve to tighten monetary policy, with the S&P 500 index on pace for its biggest percentage decline in December since the Great Depression and on the cusp of confirming it is now in a bear market. The Nasdaq has fallen nearly 22 percent from its Aug. 29 high.
Trump on Dec. 24 criticized the Federal Reserve, saying on Twitter that the “only problem our economy has is the Fed. They don’t have a feel for the market.”
U.S. stocks followed broad indexes in Europe and Asia lower on Dec. 24, with markets in Germany and Italy closed.
The Dow Jones Industrial Average fell 653.17 points, or 2.91 percent, to 21,792.2, the S&P 500 lost 65.52 points, or 2.71 percent, to 2,351.1 and the Nasdaq Composite dropped 140.08 points, or 2.21 percent, to 6,192.92.
“Markets (are) still under pressure from last week’s more hawkish Fed update, exacerbating fears about slowing growth and more expensive refinancing following years of stimulus,” said Mike van Dulken, head of research at Accendo Markets.
The political uncertainty has only added to the air of risk aversion, with benchmark 10-year Treasury notes rising 14/32 in price to yield 2.7418 percent.
The gap between two and 10-year yields has shrunk to fewer than 0.15 percentage point, a flattening of the curve that has sometimes heralded coming recessions in the past.
“Many of the financial and economic indicators that turn first around business cycle peaks are now flashing red in advanced economies,” said Simon MacAdam, global economist at Capital Economics.
“This is consistent with our view that the recent loss of momentum in the world economy will develop into a more severe slowdown in 2019.”
The flight to safe havens again boosted the yen, with the dollar hitting its lowest level against the Japanese currency since August. The yen strengthened 0.81 percent versus the greenback at 110.33 per dollar.
Gold also has regained its appeal, holding near six-month highs over $1,268 per ounce.
Brent crude futures were down $3.02 a barrel at $50.80. U.S. crude futures fell $2.94 to trade at $42.65.
Brent fell 11 percent last week and hit its lowest since September 2017, while U.S. futures slid to their lowest since July 2017, bringing the decline in the two contracts to 35 percent so far this quarter.
By Trevor Hunnicutt