US Treasury chief to confer with top market regulators

Marcus Newton
December 26, 2018

U.S. Treasury Secretary Steven Mnuchin confirmed that he called the heads of the six largest U.S. banks following a tumultuous week that saw a dive in the stock market and partial government shutdown. Investors are concerned that Trump may fire Federal Reserve Chairman Jerome Powell. He said the executives assured him their banks are healthy and have "ample liquidity" to lend to consumers and businesses.

"They have not experienced any clearance or margin issues and that the markets continue to function properly", he added.

The phone calls raised some eyebrows, with traders questioning why Mnuchin was bringing up bank liquidity when no one had expressed concerns about the issue.

"Nothing says don't panic like saying "I'm calling the plunge protection team tomorrow", Michael O'Rourke, JonesTrading's chief market strategist, told Bloomberg News. All were taken aback by the public nature of Mnuchin's tweet.

A 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. "This is the type of announcement that raises the question of whether Treasury sees problems that the rest of the market is missing", Cowen & Co. analyst Jaret Seiberg wrote in a note to clients. 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're in a turbulent time and it will be interesting to see how we end the year".

Stock markets sell off as Mnuchin move to soothe investor fears backfires

Stocks are on pace for their worst December since the Great Depression. Last week alone was the worst week for the DOW in 10 years.

At the end of the session on December 21, the Nasdaq was down almost 22 percent from its record high close in late August and formally in a bear market.

After another brutal day on Monday, the Dow is 18.8%, or 5,036 points, off its peak reached on September 20.

All the 11 major S&P 500 sectors were lower, and all the 30 components of the Dow Industrials were in the red, pushing them closer to bear territory.

Incoming White House chief of staff Mick Mulvaney also attempted to calm investors' nerves on Sunday, saying in an interview on ABC that the fundamentals of the USA economy are strong despite the recent market slide.

The stock selloff in part reflects concern about a looming slowdown in economic growth.

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Other reports by MaliBehiribAe

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