Global Markets Plunge as Trump's Attack on Fed Adds to Worries over Mnuchin's Comments and Government Shutdown

A festive mood was absent from stock markets across the world as Asian indexes turned south, following a decline on Wall Street sparked by President Donald Trump's attack on the Federal Reserve.

Investors in the U.S. had little to cheer about as the Dow Jones plummeted 653 points in a shortened trading session on Monday, capping its worst week in a decade.

Related: Government shutdown: Mnuchin calls U.S. bank chiefs after worst weekly market fall in a decade

The S&P 500 fell 2.7 percent and remained on course to record its largest percentage decline in the month of December, while the Nasdaq slid 2.2 percent.

Japanese stocks and other Asian markets that opened for trading on Christmas Day followed suit. The Nikkei 225 slid by 5 percent and has declined by 21 percent since early October. In China, the Shanghai Composite Index was down by 0.88 percent, while the smaller-cap Shenzhen Composite slid 0.81 percent and Taiwan's main benchmark was also down by over 1 percent.

"The sell-off is triggered almost entirely by developments in the U.S. markets, rather than by negative factors unique to the domestic market," Takashi Hiroki, chief strategist at Monex Securities in Tokyo, was quoted as saying by CNBC.

Markets in Hong Kong, South Korea and Australia were closed for Christmas Day.

U.S. markets have recorded losses for four consecutive sessions, with sentiment spooked by a slowing global economy, the trade dispute with China, the prospect of another interest rate increase by the Federal Reserve and a government shutdown.

Since hitting its peak on September 20, the S&P has declined 19.8 percent. A drop of 20 percent would officially mark the end of the longest bull market for stocks in modern history, a run which began almost a decade ago.

On Monday, Trump launched a scathing attack against the U.S. central bank, which he blamed for the economic headwinds currently hampering the world's largest economy.

The only problem our economy has is the Fed. They don’t have a feel for the Market, they don’t understand necessary Trade Wars or Strong Dollars or even Democrat Shutdowns over Borders. The Fed is like a powerful golfer who can’t score because he has no touch - he can’t putt!

— Donald J. Trump (@realDonaldTrump) December 24, 2018

"The only problem our economy has is the Fed," the President tweeted. "They don't have a feel for the Market, they don't understand necessary Trade Wars or Strong Dollars or even Democrat Shutdowns over Borders. The Fed is like a powerful golfer who can't score because he has no touch—he can't putt!"

Trump's criticism of the Fed came a day after US Treasury secretary Steven Mnuchin had tried to calm investors.

On Sunday, Mnuchin said he was reassured by the CEOs from the nation's six largest banks—Bank of America, Citi, Goldman Sachs, JP Morgan, Morgan Stanley and Wells Fargo—that the lenders had "ample liquidity" available.

The news took markets by surprise as concerns over liquidity had not previously shaken the markets.

Today I convened individual calls with the CEOs of the nation's six largest banks. See attached statement.

— Steven Mnuchin (@stevenmnuchin1) December 23, 2018

Mnuchin and Trump were also forced to deny reports the latter was considering firing Federal Reserve Chairman Jerome Powell. The U.S. central bank raised interest rates last week, which left Trump incensed.

The President has repeatedly criticized the Fed, showing little regard for the institution's notorious independence and describing it as a bigger economic threat than China.

Stephen Innes, head of APAC trading at OANDA said that investors "have no confidence in the administration. Markets are driven by perception and it is flat-out bad."

Friday's partial government shutdown, which followed Congress's failure to agree on a budget over funding for Trump's border wall, was also a major factor in the rout across global markets.

The House and the Senate failed to agree a deal before Congress's adjournment for the holiday period, and Trump warned the shutdown could be "very long."

Mick Mulvaney, Trump's new acting White House chief of staff, painted a similar picture during an appearance on Fox News on Sunday. "I don't think things are going to move very quickly," he told the broadcaster. "There's a chance this could go into the next Congress."

Donald Trump
U.S. President Donald Trump takes phone calls from children as he participates in tracking Santa Claus’s movements with the North American Aerospace Defense Command (NORAD) Santa Tracker on Christmas Eve in the East Room of the White House, on December 24. Chip Somodevilla/Getty Images

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