Trump slams Fed’s Powell, says won’t stop him from quitting

KUWAIT: A trader is seen on the floor of Boursa Kuwait in this recent file photo.

WASHINGTON/KUWAIT: EU Council President Donald Tusk warned yesterday that US President Donald Trump’s escalating trade skirmishes with China and Europe could force economies around the world – including in Kuwait and the Gulf – into recession. “Trade wars will lead to recession, while trade deals will boost the economy,” Tusk said as leaders of the Group of Seven (G7) countries descended on the French resort town of Biarritz for a three-day summit.

Trump had said Friday that he would not stand in the way of beleaguered Federal Reserve chief Jerome Powell if he decided to quit. Asked if he wants Powell to resign, Trump told reporters: “If he did, I wouldn’t stop him.” Earlier on Friday, Powell had vowed to act to ensure the American economic expansion continues, but warned the central bank has no “rulebook” for dealing with the US-China trade war that deteriorated further almost as he spoke.

Boursa Kuwait ended trading Thursday in the red zone as the Premier Market Index went down 0.51 points reach 6,610.18 points. The Main Market Index dropped 10.36 points to reach 4,799.94 points and the All Share Market Index shed 3.67 points to stand at 6,000.10 points. Stock volume reached 106.9 million shares in 5,095 deals with a value worth KD 22.7 million.

In Saudi Arabia, the index fell 0.7 percent as Samba Financial Group lost 2.6 percent and National Commercial Bank slipped 0.8 percent. Banking stocks have come under pressure in recent weeks from the Saudi central bank’s decision to follow the US Federal Reserve in cutting interest rates, which analysts expect to squeeze lenders’ profit margins.

Dubai’s index was down 0.8 percent at 2,769 points, its lowest close since July 21. Blue-chip developer Emaar Properties slid 2.5 percent, while Emirates NBD traded 1.3 percent lower. Nasdaq Dubai-listed port operator DP World rose as much as 5 percent after a reporting 26.8 percent jump in the first-half profit, before closing 0.4 percent down as global trade disputes and regional geopolitics continued to weigh on its outlook.

Abu Dhabi’s index was flat, with First Abu Dhabi Bank gaining 0.3 percent. Gulf Pharmaceutical Industries (Julphar) slumped 10 percent, extending losses to a third straight session after it recalled a batch of its Laxocodyl suppository over a labelling error. Qatar’s index rose 0.4 percent in a boost from market heavyweight Industries Qatar which increased 1.4 percent.

Wall Street stocks finished a bruising session sharply lower Friday, while the Dow sank more than 600 points, or 2.4 percent, to 25,628.90, pushing the blue-chip index into the red for the fourth straight week. European stocks also had a rocky day, turning sharply downward. The escalation of the trade war comes amid rising recession fears, with Britain and Germany both reporting negative growth in the second quarter and China’s economy slowing.

China announced Friday new tariffs on $75 billion in US products and Trump lashed out with threats of further retaliation, meaning the trade uncertainty that Powell said is exacerbating the global slowdown is unlikely to go away soon. Trump lost no time in criticizing Powell – and swiping at Beijing. In a furious flurry of tweets, Trump attacked the Fed’s stewardship of the world’s biggest economy and vowed a quick response to China.

“As usual, the Fed did NOTHING! It is incredible that they can ‘speak’ without knowing or asking what I am doing, which will be announced shortly. We have a very strong dollar and a very weak Fed,” Trump tweeted after Powell’s comments. “My only question is, who is our bigger enemy, Jay Powel or Chairman Xi?” Trump said, misspelling the Fed chief’s name in an unprecedented attack on the independent central bank.

The Fed cut the benchmark interest rate last month for the first time in more than a decade, partly as insurance against the impact of trade uncertainties on the economy. But in his hotly anticipated speech to an annual central banking conference in Jackson Hole, Wyoming, Powell cautioned that the Fed has no “rulebook” for dealing with the trade war fallout. “The three weeks since our July FOMC meeting have been eventful, beginning with the announcement of new tariffs on imports from China,” he said.

“The global growth outlook has been deteriorating since the middle of last year. Trade policy uncertainty seems to be playing a role in the global slowdown and in weak manufacturing and capital spending in the United States.” While Powell said the US economy “is now in a favorable place,” it faces “significant risks” and he again pledged that the Fed “will act as appropriate to sustain the expansion.” However, he warned that there is no “settled rulebook for international trade … no recent precedents to guide any policy response to the current situation.”
Stock markets seemed to like the speech, regaining some ground after sinking on news of Chinese tariff retaliation, but they fell after Trump’s outburst and the Dow closed with a loss of more than 600 points, or 2.4 percent. Markets swung when he added that “our great American companies are hereby ordered to immediately start looking for an alternative to China”.

“Powell is rather more diplomatic in his language than the president – a low bar, admittedly – but it is clear from his speech that the single biggest factor driving both market volatility, the actual global slowdown, and fears of a US slowdown, is trade policy,” said Ian Shepherdson of Pantheon Macroeconomics. The Fed chief has had some communication misfires as he walks the tightrope between competing views on the correct policy and defending the institution’s independence from political interference.

Powell seemed to be making an economic case for some further stimulus – possibly to ward off concerns he is bowing to the relentless pressure from Trump to drastically cut rates – but he also noted the generally healthy state of the US economy, a possible signal he does not foresee a series of cuts. Those favoring a lower interest rate face opposition within the Fed, but Powell tried to lay those concerns to rest as well, saying he does not see any buildup of financial risks or price pressures.

“Low inflation seems to be the problem of this era, not high inflation,” he said. “In the unlikely event that signs of too-high inflation return, we have proven tools to address such a situation,” he added. Shepherdson said the inflation “hawks have been vocal recently, but they seem still to be outnumbered”. “We don’t envy Mr Powell and his colleagues right now; all their analysis and forecasts can be upended by a single tweet, so the policymaking process has been wrecked, even without the overlay of the president railing at the Fed like Lear on the heath, but less coherently.”

Fed officials say tariffs and trade tension are causing businesses to put off spending. “It’s pretty clear to me that Powell was sending a message that if you are so concerned about the economy, lowering rates is not going to help you,” said Craig Bishop, lead strategist of the fixed income group at RBC Wealth Management. “You need to do something about trade. That’s not a message Trump gets.”
The trade war has left world central bankers here on edge as they also try to navigate a global slowdown many attribute to Trump’s trade tactics, which they worry may have lasting repercussions. “Without question the euphemism of ‘trade tensions’ does not do justice to the scale of the impact of recent trade actions, actual and potential, and to some extent the fundamental challenge to the nature of the trading system,” Bank of England Governor Mark Carney said during a luncheon speech. – Agencies