United States President Donald Trump has said he is “not thrilled” about the Federal Reserve’s plan to gradually raise American interest rates this year.
The US dollar weakened slightly after Mr Trump broke with several decades of White House tradition to criticise the Fed, saying higher rates would impact the US economy and American competitiveness.
“Because we go up and every time you go up they want to raise rates again,” Mr Trump said in an interview with CNBC.
“I don’t really — I am not happy about it.
“But at the same time I’m letting them do what they feel is best.
“I don’t like all of this work that we’re putting into the economy and then I see rates going up.”
Markets at 7:15am (AEST):
- ASX SPI 200 futures -0.2pc to 6,201, ASX 200 (Thursday’s close) +0.3pc at 6,263
- AUD: 73.56 US cents, 56.5 British pence, 63.17 Euro cents, 82.68 Japanese yen, $NZ1.09
- US: Dow Jones -0.5pc at 25,065, S&P 500 -0.4pc at 2,804, Nasdaq -0.4pc at 7,825
- Europe: FTSE +0.1pc at 7,684, DAX -0.6pc at 12,686, CAC -0.6pc to 5,417, Euro Stoxx 50 -0.4pc at 3,472
- Commodities: Brent crude -0.4pc at $US72.58/barrel, spot gold -0.3pc at $US1,222.40/ounce, iron ore +1.8pc at $US65.24/tonne
Mr Trump added that he was concerned that the Fed’s rate hikes may put the United States at a “disadvantage” while the Bank of Japan and the European Central Bank keep their monetary policy loose.
The White House went into damage control afterwards, saying the US President respects the Fed’s independence and is not interfering with its policy decisions.
The US dollar index hit a one-year peak overnight (95.65), but turned negative after Mr Trump’s comments — before recovering 0.1 per cent higher (at 95.22).
Aussie dollar falls, while copper plunges
Australian shares are expected to drift lower amid a plunge in metal prices and a tumble in foreign markets.
After rebounding yesterday, the Australian dollar fell considerably (-0.6 per cent) back to 73.5 US cents.
The local currency was also weaker against the euro (-0.6 per cent), Japanese yen (-0.9 per cent) and British pound (-0.1 per cent).
Copper fell to a one-year low as funds accelerated their selling to worries about demand from the trade tussle between the United States and top consumer China.
Benchmark copper (on the London Metal Exchange) closed 1.4 per cent lower at $6,065 a tonne.
It fell as low as $5,988 earlier in the session, its lowest in 12 months — and represents a 20 per cent drop since June 7.
EU may retaliate against the US
The Dow Jones Industrial Average dropped 135 points, or 0.5 per cent, to 25,065. The S&P 500 and Nasdaq both slipped by 0.4 per cent each.
Market sentiment was dampened by growing concerns that the Europe will retaliate against the US by imposing tariffs of its own.
The European Union’s trade commissioner Cecilia Malmstrom said she hopes an EU mission to Washington, on July 25, will ease a transatlantic trade dispute.
She also confirmed the trading bloc is preparing a list of goods of US imports which will be targeted — if the Trump administration introduces tariffs on exported EU automobiles.
“We are preparing together with our member states a list of rebalancing measures there as well,” EU trade commissioner Cecilia Malmstrom told reporters in Brussels.
“And this we have made that clear to our American partners.”
The United States imposed tariffs on EU steel and aluminium on June 1 and Mr Trump is threatening to extend them to EU cars and car parts.
The EU has already imposed its own import tariffs on 2.8 billion euros ($3.8 billion) worth of US products ranging from bourbon to motorcycles.
Trade commissioner Cecilia Malmstrom will travel to Washington next week with European Commission president Jean-Claude Juncker, who is due to hold talks focused on trade with Mr Trump.
Sour earnings and trade fears
Wall Street was also dragged down by banking stocks JP Morgan Chase, Citigroup and Bank of America — all of which retreated by more than 1.2 per cent each.
Contributing to the losses were some disappointing corporate results from large companies like American Express (-2.7pc) and eBay (-10.1pc).
eBay lowered its full-year revenue forecast to between $US10.75 billion and $US10.85 billion (from $US10.9 billion to $US11.1 billion earlier).
American Express shares dropped after the credit card company reported rising expenses due to increased spending on its rewards program (up 11 per cent to $US2.43 billion).
This pushed total expenses up 7 per cent to $US7.11 billion in the quarter.
The company has been bolstering its rewards programs as it tries to weather competitive pressures from big bank rivals, including JPMorgan Chase and Citigroup.