It’s about time, I suppose. Financial markets have finally decided they can’t just factor in Trump unpredictability any more.
But you get that type of reaction when a president threatens publicly to rain “fire and fury” on an unstable opponent on the other side of the globe.
There is a momentum to the negative sentiment now
Nuclear flashpoint between the US and Kim Jong Un’s rogue North Korean regime have caused share sell-offs, not dramatic but notable, from the US and Asia to the UK and Europe. It comes after markets had been remarkably relaxed as Trump has fired at will numerous advisers to the White House since his January inauguration, and not got a single piece of serious legislation passed.
Alleged Russian involvement in his election victory, controversial US immigration policies against some Muslim nations, the running sore that is Syria? Markets have taken them all in their stride.
But the Korean developments dwarf everything. There is a momentum to the negative sentiment now. The London stock market shed 0.6 per cent on Wednesday, followed by another 1.4 per cent yesterday. Paris lost 0.6 per cent and Frankfurt 1.2 per cent yesterday after losing 1.4 per cent and 1 per cent respectively the day before. The Nikkei index in Japan trod water and caught its breath yesterday after a 1.3 per cent slide 24 hours earlier.
We have had the standard-issue investor reaction to political volatility of a switch to the perceived havens of gold and the Swiss franc. But if war does break out on the Korean peninsula will all bets be off about what constitutes a haven in these outlandish times of presidential international policy made on the tweet and apparently on the hoof?
Geo-political turbulence has always made markets uneasy. But, bizarrely to many watchers, since Trump reinvented the template of how presidents act, markets have seemed phlegmatic, if short of sanguine, about a presidential bull who, to use the phrase, carries his own china shop around with him.
But the penny now seems to have dropped. The apparently intractable Korean problem is far from Trump’s fault. It also dogged presidents Obama, Bush and Clinton.
But the incendiary words and the stakes are a watershed, and markets sense it.