US regulators tell Mnuchin nothing out of ordinary in markets

Steven Mnuchin US Treasury secretary

Stocks are set to open lower, a day after an unusual statement by Treasury Secretary Steven Mnuchin, who convened a series of calls on Sunday with the CEOs of the country's biggest banks.

President Trump's Treasury secretary called six top U.S. bankers on Sunday amid concerns over falling stocks, and has revealed he plans to convene a group of officials known as the 'Plunge Protection Team'.

Mnuchin convened a roughly 15-minute call on Monday with the President's Working Group on financial markets, which includes the chairman of the Federal Reserve and top market and business regulators, to ensure all the agencies were well-coordinated to monitor markets appropriately during the government shutdown, according to a source familiar with the matter. The Working Group dates to March 1988 when Washington was still trying to figure out what was behind the "Black Monday" stock market crash of October 1987.

"They have not experienced any clearance or margin issues and that the markets continue to function properly", he added. "It's sending the proper message to the market so they can calculate the real picture into their Monday opening".

Investors are betting USA economic growth will slow as a tax cut stimulus fades and as three years of gradual interest rate hikes by the Federal Reserve cool purchases made by businesses and households.

In late morning trade in NY, the Dow was down 1.81 per cent and the S&P 500 was off by 1.55 per cent.

Secretary Mnuchin is being called an "idiot" and "clueless" by award-winning winning economist Paul Krugman.

Wall Street is also closely following reports that Trump has privately discussed the possibility of firing Federal Reserve Chairman Jerome Powell.

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The Federal Reserve ploughed ahead on Wednesday with the fourth quarter-point interest rate rise in 2018, to 2.25-2.5 per cent, defying pressure from US President Donald Trump who urged the central bank to keep rates unchanged.

Mnuchin on Saturday quoted Trump as denying any plan to remove Powell.

On top of these concerns, Washington is now roiled by a partial government shutdown that began on Saturday due to a congressional impasse over Trump's demand for more funds for a wall on the border with Mexico.

Whipsaw markets and a string of steep dives have spawned a pervasive anxiety in the White House, according to senior officials, where for the past two years the strength of the United States economy has provided steady reassurance amid even the deepest of political crises. "Trump needs a political win, a PR that looks like he's on top of the situation, and that's what the weekend strikes me as".

With only a handful of trading days left in the year, the S&P 500 is down 7.1 per cent for the week, putting it on track for its worst December since the 1930s and leaving the benchmark 9.6 per cent lower for the year.

Keeping an eye on the financial systems is an appropriate role for the Treasury Department, to be sure. "We're no more happier than anybody else over the performance of the stock market for the last month".

"He's calling bank CEOs asking about their liquidity".

In his statement Sunday, Mnuchin assured the public that the economy is doing well. That doesn't make me feel all warm and fuzzy. "That's turned into an economic crisis".

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