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Stocks Plunge and Trump Accuses the Fed

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President Donald Trump attacked the Federal Reserve for the second consecutive day as the major U.S. stock indices suffered their biggest one day decline in months. Trump said that the Fed has gone crazy by raising interest rates fast, and believed that the Fed is hurting the stock market more than the trade war with China. The Dow Jones Industrial Average futures fell 3.9% or 1035 points to 25437, where the benchmark logged its worst one-day decline since early February. The S&P500 futures dropped 3.9% or 114 points to 2772, and the Nasdaq futures declined by 5.2% or 391 points to 7003, to log its worst day since the Brexit. The bloodbath continued during the Asian session where the Dow Jones futures traded at a two-month low of 25181, S&P500 slipped to a three-month low of 2748, and the Nasdaq futures dropped to 6925, the lowest since late May. The CBOE volatility index which usually measures the investor's fear rose to 22.96, the highest since April. The International Monetary Fund Chairwoman Christine Lagarde commented on the drop in the stock market and warned about debt, emerging markets, and trade tensions.

USD

The dollar which measures the greenback against a basket of major currencies tumbled to a ten-day low of 95.18, as the U.S. Treasury yields retreated following Trump's comments. The USDJPY fell to a three-week low of 111.97 as the demand for the Japanese Yen rose due to the drop in stocks. The dollar could be under additional pressure if Trump continues to criticize the Fed's rate path. Moreover, the U.S. Treasury secretary Mnuchin warned China about using the currency devaluation as a tool in the trade war which suggests more criticism to the Fed if the dollar strengthens. On the other hand, the market participants will be waiting for the release of the September Consumer Price Index later today.

Metals

Gold prices rose slightly as the dollar weakened across the board. The gold ounce bounced-off a low of $1185 to settle higher at $1194. Usually, investors rush for gold in cases of market collapse or uncertainty, but the performance shows that the precious metal could be losing it safe haven status as Treasury yields are at a multi-year high. The silver ounce traded at a two-week low of $14.24.

Oil

Oil prices tumbled by more than 2%, weighed down by the sharp fall in the global stock market and build up in the U.S. crude inventories. The American Petroleum Institute reported that the U.S. weekly crude oil stock rose by 9.750 million barrels last week. The West Texas Intermediate crude futures fell settled lower at $72.61, and the Brent futures finished at $82.62. The weak performance continued during the Asian session where the prices traded at a two-week low. On the other hand, the Energy Information Administration will report the official crude inventories later today.

Major Economic Events

GMT Country Event Expectation Previous
11:30 EU ECB Publishes Account of Monetary Policy Meeting  215 211
12:30 US Core CPI (MoM) (Sep) 0.2% 0.1%
12:30 US Core CPI (YoY) (Sep) 2.3% 2.2%
12:30 CA New Housing Price Index (MoM) (Aug) 0.1% 0.1%
15:00 US Crude Oil Inventories 2.620 7.975

 

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