Trump triggers investor nerves with travel ban
DONALD Trump’s hugely controversial travel ban on largely Muslim countries sent tremors through global financial markets today as worries mounted over the increasingly protectionist stance of the new US President.
The 90-day ban on citizens from Iraq, Syria, Iran, Sudan, Libya, Somalia or Yemen, as well as a four-month ban on refugees, compounded concerns over weak trade sapping the growth of the world’s biggest economy in the final quarter of last year.
Investors dumped shares in London, leaving the FTSE 100 down 52.70 points or 0.7% to 7131.79, a “risk-off ” trade echoed across Europe’s major markets as France’s CAC 40 and Germany’s Dax sank by close to 1%.
Traders instead sought protection in traditional safe-havens such as the Japanese yen and gold, which rose 0.5% to almost $1200 an ounce.
The oil price fell to $53 a barrel and metal prices eased, while airline stocks like British Airways owner IAG, a major Transatlantic flyer, fell 2%.
CMC Markets’ chief analyst Michael Hewson said: “There’s certainly an element of risk off here, because it calls into question the safety of US assets. If you have somebody who is a bit of a loose cannon, it calls into question the investment case for the US. It is also not a good longterm economic strategy, although Congress can rein him in.”
The dramatic intervention by Trump (pictured) comes after the US grew at a quarterly pace of less than 0.5% between October and December with trade making its weakest contribution to growth since 2004.
The figures will give serious food for thought to Federal Reserve chairman Janet Yellen, who has pencilled in three rate hikes in 2017 to follow December’s first tightening of monetary policy for a year.
The Fed’s latest meeting comes this week amid the latest flurry of executive orders from the White House and March is seen as the most likely month for a rate rise.
Simon Derrick, currency strategist at BNY Mellon, said: “So much happened last week in terms of policy shifts, you have to look at this week and think ‘what happens next?’.
“Put that with the GDP figures and you’re in a more risk-off mood than you would have been.”
The new President’s ban has triggered outrage from parts of the business community.
Starbucks chief executive Howard Schultz is planning to hire 10,000 refugees over five years in 75 countries in response, while bosses at leading firms including Apple, Google, Microsoft and Netflix h ave slammed the policy.
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