London (AFP) – Gold reached $3,500 an ounce for the first time Tuesday as US President Donald Trump’s tariffs and verbal assault on the Federal Reserve prompted investors to snap up the safe-haven asset. Wall Street rebounded from sharp losses the previous day at the start of trading, while Europe’s main stock markets diverged in afternoon deals as the region’s trading resumed after a long weekend break for Easter. Asian indexes closed mixed, while the dollar diverged against major rivals and oil prices firmed.
“The move across global stock indices appears more reflective of consolidation than panic, but markets remain on edge,” said Trade Nation analyst David Morrison. Sentiment wasn’t helped by the International Monetary Fund saying Trump’s new tariff policies would take a big bite out of global growth. The IMF now sees the global economy growing by 2.8 percent this year, 0.5 percentage points lower than its previous forecast in January.
“Lack of certainty is sending investors right into the arms of traditional safe haven assets, with gold and the Japanese yen both cashing in on the drama,” noted Matt Britzman, senior equity analyst at Hargreaves Lansdown. With the US tariff blitz still causing ructions on global trading floors, investors are now dealing with the added worry that Trump will try to remove the country’s top banker. The president last week took a swipe at Fed chief Jerome Powell over the latter’s warning that the sweeping levies would likely reignite inflation.
While that raised eyebrows, Trump sent shivers through markets Monday by again calling on Powell to make pre-emptive cuts to US interest rates and calling him a “major loser” and “Mr Too Late”. The Republican tycoon said on his Truth Social platform that there was “virtually” no inflation, claiming energy and food costs were well down and pointed to the several interest rate reductions by the European Central Bank.
The outbursts have fanned concern that Trump is preparing to oust Powell, with top economic adviser Kevin Hassett saying Friday that the president was looking at whether he could do so. Panicked Wall Street investors dumped US assets again on Monday, with all three main indexes ending down around 2.5 percent. Analysts warned of another rout should Trump try to fire the Fed boss, which many said could cause a crisis of confidence in the US economy.
“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 Pepperstone strategist Michael Brown. “Lower, much lower, equities; Treasuries sold across the board; and, the dollar falling off a cliff.”
Briefing.com analyst Patrick O’Hare put part of Wall Street’s Tuesday rebound down to thinking that Trump won’t fire Powell and “that he is simply setting him up now to take the blame in the event of an economic downturn”.
– Key figures at 1330 GMT –
New York – Dow: UP 1.0 percent at 38,566.69 points
New York – S&P 500: UP 1.0 percent at 5,210.70
New York – Nasdaq Composite: UP 1.2 percent at 16,062.15
London – FTSE 100: UP 0.2 percent at 8,292.34
Paris – CAC 40: DOWN 0.3 percent at 7,264.83
Frankfurt – DAX: DOWN 0.4 percent at 21,114.10
Tokyo – Nikkei 225: DOWN 0.2 percent at 34,220.60 (close)
Hong Kong – Hang Seng Index: UP 0.8 percent at 21,562.32 (close)
Shanghai – Composite: UP 0.3 percent at 3,299.76 (close)
Euro/dollar: DOWN at $1.1467 from $1.1510 on Monday
Pound/dollar: DOWN $1.3371 at $1.3377
Dollar/yen: DOWN at 140.63 yen from 140.89 yen
Euro/pound: DOWN at 85.76 pence from 86.03 pence
Brent North Sea Crude: UP 0.9 percent at $63.09 per barrel
West Texas Intermediate: UP 1.1 percent at $63.85 per barrel
© 2024 AFP
