US fears stoking global anxiety

GLOBAL stock markets are heading into the year-end under a heavy cloud after another rout this week as US political uncertainty added to heightened concerns over slowing global economic momentum.

Asian equities were shaky yesterday following the plunge in Wall Street on Christmas Eve in the face of a series of unnerving US political developments, including a US federal government shutdown and President Donald Trump’s increasingly hostile stance towards the Federal Reserve chairman.

US Treasury Secretary Steven Mnuchin had also raised market concerns by convening a crisis group amid the pullback in stocks.

S&P 500 E-Mini futures were effectively flat, pointing towards a subdued start for Wall Street when the US market reopens after Christmas Day, when many of the world’s financial markets were shut.

MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.1 per cent. Japan’s Nikkei bounced 1.8 per cent after diving 5 per cent the previous day to a 20-month low and slipping into bear market territory.

“In addition to concerns towards the US economy, the markets are now having to grapple with growing turmoil in the White House which has raised political risk ahead of the year-end,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

US stocks have dropped sharply in recent weeks on concerns over weaker economic growth.

Mr Trump has largely laid the blame for economic headwinds on the Fed, openly criticising its chairman, Jerome Powell, whom he appointed.

That has further rattled investors as they grappled with fears of slowing global growth, corporate earnings and US-China trade tensions.

In an effort to reassure investors, Treasury Secretary Mnuchin spoke on Sunday with the heads of the six largest US banks, who confirmed they have enough liquidity to continue lending and that “the markets continue to function properly”.

US bond yields have declined as the market rout, including a steep sell-off in oil, prompted investors to move into safe-haven government debt, adding to the growing pressure on the dollar.

The dollar traded at ¥110.56 after retreating to a fourmonth low of ¥110.00 overnight. The euro was 0.25 per cent higher at $US1.1418 ($A1.6188).

The 10-year US Treasury note yield stood at 2.747 per cent following a descent on Monday to 2.733 per cent, lowest since early April.