By CCN Markets: The Dow Jones has plunged by well over 2 percent in a single session on Friday as U.S. President Donald Trump issued a stern warning towards China.
Ahead of the G7 Summit, President Trump expressed his displeasure on the progress of the trade talks between the U.S. and China, requesting U.S. companies to find an alternative market outside of China.
President Trump said:
“We don’t need China and, frankly, would be far better off without them. The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must STOP. Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA. I will be responding to China’s Tariffs this afternoon. This is a GREAT opportunity for the United States.”
Jerome Powell, the chairman of the Federal Reserve, was labeled “an enemy” by President Trump who has continued to place increasing pressure on the central bank to aim for additional cuts on the benchmark interest rate, which could relieve some of the pressure on the declining Dow Jones.
Will a rate cut provide key lifeline for the Dow Jones?
Since July 24, within a month, the Dow Jones has fallen from 27,269 to 25,628 points despite the 25-basis point cut initiated by the Federal Reserve in July.
While a rate cut by the Federal Reserve is likely to encourage other major central banks to initiate rate cuts as seen in stance of the European Central Bank, several high-profile economists have said that the outlook of the global economy has worsened in recent months.
Gita Gopinath, the head economist at the International Monetary Fund, said in an interview with CNBC that global economic growth has subdued, leading the sentiment around the U.S. equities market and the Dow Jones to become gloomy.
“Global growth is subdued, and we describe it as fragile. There are many downside risks. One of the risks we keep flagging is risks on the trade front. The developments that we’re seeing as recently as today give us great concern about what’s going to happen to growth going forward,” she said.
Even if the Federal Reserve eyes an additional rate cut by the year’s end, economists remain unsure whether it would be sufficient to recover the momentum of the market.
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