Market snapshot: investors respond to overnight selling on Wall Street

Not content with rattling foreign powers, domestic consumers and investors, the US president launched another salvo on the Federal Reserve Chair Jerome Powell which sent markets lower again.

It is unclear whether there is constitutional room to remove the Fed Chair early, but in any event the attack does little to improve the reputation of the US at a time when the validity of traditional havens such as the dollar and Treasuries are being brought into question. At the same time, the volley raises doubts on the central bank’s independent status, adding a new layer of uncertainty at an inopportune time. 

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With Treasury yields spiking once more and the dollar falling to its lowest level since 2022, there is little sign of immediate respite. The technology heavy Nasdaq index again bore the brunt of sustained selling, with falls of between 3% and 6% for the likes of Tesla Inc (NASDAQ:TSLA), NVIDIA Corp (NASDAQ:NVDA) and Meta Platforms Inc Class A (NASDAQ:META).

Corporate earnings will also have an important role to play as the week wears on, with outlook and guidance comments likely to grab the attention of investors. A busy reporting week will bring updates from the likes of Tesla, Alphabet Inc Class A (NASDAQ:GOOGL), Boeing Co (NYSE:BA), Intel Corp (NASDAQ:INTC) and International Business Machines Corp (NYSE:IBM), and it remains to be seen whether the level of caution in boardrooms is escalating in the absence of being able to plan or anticipate the effect of tariffs on supply chains, pricing, investment and hiring decisions.

In the meantime, the main indices lurched lower again, bringing the cumulative year to date performances into double-digit negative territory across the board. The Dow Jones has fallen by 10.3% and the S&P500 by 12.3%, while the 17.8% drop for the Nasdaq leaves the index firmly in bear market territory since its recent record high in December.

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An interesting development of the turbulence has been the relative resilience of some Asian markets, where for example the Hang Seng index has added 10% so far this year, with the Shanghai Composite also marginally in positive territory. The Nikkei has fared less well with a decline of 13%, due in part to the unintended strength of the yen resulting from dollar weakness, which in turn has hit prospects for its largely exporting economy. 

At the same time, there is also increasing evidence that some of the monies being raised from the so-called “Sell America” trade is being deployed to some Asian regions, where China are certainly not taking the tariff threats lying down and where the possibility of robust defiance and additional stimulus underpin what is a seemingly growing power.

Amid the turmoil and despite the relative strength of sterling which itself is mainly a by-product of dollar weakness, the FTSE100 is again displaying its defensive credentials.

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With investors seeking alternatives to the beleaguered US markets, the primary index has attracted the interest of some investors similar to the Asian experience. A relatively flat opening was the result in some strength in the miners given a fresh spike in the gold price and apparently improving Chinese prospects being offset by those stocks with an obvious US tech exposure, such as Polar Capital Holdings (LSE:POLR), Scottish Mortgage Ord (LSE:SMT)and to some extent Pershing Square Holdings Ord (LSE:PSH). 

Despite an unconvincing opening the FTSE100 has eked out a gain of 1.2% in the year to date, with an average dividend yield of 3.6% providing an additional attraction. The more domestically focused FTSE250 has performed poorly in comparison, with a decline of 6.9% reflecting both the overarching concern as well as limited growth prospects as the UK faces additional challenges of its own.