Stocks set fall after Steven Mnuchin’s odd statement fails to calm markets

Steven Mnuchin speaks during his interview with Reuters in Jerusalem

Last week the blue-chip Dow Jones Industrial Average plunged 6.9 percent, while the broader S&P 500 tumbled 7.1 percent and the tech-heavy Nasdaq Composite plummeted 8.4 percent. The Dow, which fell 2.9%, and the S&P 500 suffered their biggest Christmas Eve declines ever.

Asian stocks were mixed on Monday after Mnuchin's calls to the bankers, but analysts expressed both surprise and alarm at the Secretary's Sunday statement, saying it might do the opposite of calming current jitters.

On Monday, the market recovered by late morning, but then slid even lower after President Donald Trump tweeted: "The only problem our economy has is the Fed".

Trump has directed much of his frustrations over the markets on his treasury secretary, according to a person familiar with the matter, who said Trump has vented that Mnuchin's recommendation of Jerome Powell for the chairmanship of the Federal Reserve was a fateful mistake.

Seiberg went on to say it is not viewed by industry insiders as a constructive move on the part of Mnuchin to have such conversations with major bank CEOs two days before Christmas. Mnuchin said the bankers "confirmed they have ample liquidity available for lending to consumer, business markets, and all other market operations".

The unusual statement by Mnuchin on Sunday about his conversation with the banks and plans to convene the so-called Plunge Protection Team "was not especially comforting, however, given that investors had not generally been questioning market functioning in recent days, despite large declines", Nick Bennenbroek, currency strategist at Wells Fargo in NY, wrote in a note to clients.

The timing of the comments, just before markets opened on Sunday, was also seen as odd.

In his statement Sunday, Mnuchin assured the public that the economy is doing well.

Mnuchin said on Sunday that he conducted a series of calls with CEOs of the country's six largest banks, namely Brian Moynihan, Bank of America; Michael Corbat, Citi; David Solomon, Goldman Sachs; Jamie Dimon, JP Morgan Chase; James Gorman, Morgan Stanley and Tim Sloan, Wells Fargo. Nor did he consult the president on a separate decision to ask the nation's biggest banks about their ability to lend to consumers and other financial companies, the person said. "We do not see this type of announcement as constructive and worry that it can trigger the vary panic that Treasury wants to avoid".

Mnuchin, who chairs the President's Working Group on financial markets, will also convene a call with Powell; Jay Clayton, the head of the Securities and Exchange Commission; and Christopher Giancarlo, chairman of the Commodities and Futures Trading Commission, to discuss how regulators can assure normal market operations.

With the S&P 500 down 17 per cent since September, the benchmark is on pace for its worst quarter since 2008. Last week alone was the worst week for the DOW in 10 years. The Nasdaq is in a bear market. Financing for about a quarter of federal government programs expired at midnight on Friday and the shutdown could continue to January 3.

Trump has criticized the US central bank for raising interest rates this year, which could further dampen economic growth. -China trade dispute and signs that economies in Europe and China are slowing.

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