Markets are mixed so far Tuesday as Trump-Fed tensions remain
Canadian equities should manage a mildly positive start to trading Tuesday following another tense session on Monday.
The S&P/TSX Composite Index closed down 0.76% yesterday as global equities were punished by tension between Donald Trump and the chair of the Federal Reserve, Jerome Powell, with the president criticizing the central banker over the pace of interest rate cuts. US futures are higher as of 5am ET Tuesday.
With trade tensions also remaining, despite rhetoric suggesting progress with several key US trading partners, investors are still cautious – the CNN Fear & Greed Index points to ‘extreme fear’ – and havens are in favour while the historic safe space of Treasuries are not.
“With increasing rhetoric from the administration admonishing the Fed to cut rates and the markets entertaining intensifying discussions about the possibility of replacing the Fed chair, we don’t expect a rush back into the market from abroad,” John Velis, a strategist at Bank of New York Mellon told Bloomberg in reference to US bonds. “The haven status of such assets is increasingly in question.”
Gold reached yet another record high of $3,500 early Tuesday as bullion gained more than 2% having jumped almost 3% Monday. The metal has seen its value grow by a third since the start of the year as investors shift from US securities and the greenback.
Bitcoin and Ether are both higher this morning (by around 1% and 2% respectively) and Brent crude is up 1% to around $67 a barrel.
Trump’s criticism of Powell comes as the president ramps up his pressure on financial services firms. An executive order he signed in February sought to give his administration greater control over key boards and agencies that technically fall under the executive branch of US government but have traditionally been allowed a high degree of independence.
New guidance issued by the Office of Information and Regulatory Affairs requires bodies such as the SEC and CFTC to involve the White House in rulemaking.
His executive order states that these “regulatory agencies currently exercise substantial executive authority without sufficient accountability to the President, and through him, to the American people.” It adds that they “have been permitted to promulgate significant regulations without review by the President” and that this is inconsistent with an elected president.
The OIRA guidance comes as the Trump administration’s attempt to slash the power of the Consumer Financial Protection Bureau through layoffs of most of its staff has been paused by a federal judge.
