The Dow Jones Industrial Average lost more than 800 points, its biggest decline since Brexit

New York (AFP) - Wall Street stocks plummeted Wednesday amid worries about surging US interest rates and the impact of trade disputes, as President Donald Trump blamed the Federal Reserve, saying it had “gone crazy.”

US shares suffered a broad-based selloff that slashed more than three percent from major indices.

“I think the Fed is making a mistake. It’s so tight. I think the Fed has gone crazy,” Trump told reporters shortly after markets closed, as he arrived in Erie, Pennsylvania for a rally.

Trump has repeatedly touted Wall Street records as proof of the success of his economic program, including his confrontational trade strategy.

But he downplayed the first major drop in months, saying, “it’s a correction that we’ve been waiting for a long time.”

He has frequently criticized the US central bank for gradually raising interest rates, and on Wednesday reiterated his position: “I really disagree with what the Fed is doing.”

In fact it is his policies that are behind the changes: tax cuts and spending policies are expected to juice the economy, adding to the Fed’s justification to raise interest rates, while trade conflicts raise costs for companies, which could hit the bottom line in quarterly earnings – something analysts said helped prompt Wednesday’s sell-off.

The rout in US shares followed substantial losses on European bourses, due in part to tensions between Brussels and Rome over Italian budget plans that have revived fears about the eurozone.

“There are a number of worries for investors right now, from the pace of rising bond yields and the impact on investor sentiment, to Italy’s populist coalition playing a game of chicken with the European Commission, stalling Brexit negotiations and the ongoing trade conflict between the US and China,” said Craig Erlam, senior market analyst at Oanda trading group.

- Big names fall hard -

Many of the biggest US names fell hard, with Apple, Boeing and Facebook all slumping more than four percent and Amazon, Nike and Microsoft dumping more than five percent.

As Hurricane Michael pummeled Florida, Wall Street was battered by storms as well, with the Dow shedding about 830 points, in the biggest fall since February, to close the day at 25,498.74.

The tech-rich Nasdaq Composite Index plummeted 4.1 percent to finish the session at 7,422.05, its worst fall in percentage terms since the surprise Brexit vote in June 2016.

“The selling is not panicking but it’s persistent,” Briefing.com analyst Patrick O’Hare said of the proceedings. “It’s all about investors rethinking their exposure to stocks.”

Concerns about rising interest rates and the trade war impact on corporate earnings sent Wall Street deep into the red

O’Hare attributed the losses to worries about higher interest rates but also cited a “broad-scale deterioration in sentiment” as investors realized that the pullback on Wall Street failed to prompt bargain hunting to stabilize prices, as has been the norm in recent years.

Stocks have been under pressure since the yield on 10-year US Treasury bonds jumped above three percent last week, a sudden move that raised fears of an overheating economy, speeding inflation and more aggressive Federal Reserve interest rate increases.

Last week’s jump in yields followed strong US data but many analysts have been anticipating dynamics in the bond market to change due to expectations that central banks in Europe and Japan will soon phase out bond-buying programs.

“It’s shifting the tectonic plates,” said Jack Ablin, chief investment officer at Cresset Wealth Advisors.

He said the rising appeal of bond investments would be a challenge for stocks in the foreseeable future as capital moves out of riskier equities.

And while stocks could get a boost from strong corporate earnings, there are concerns the US trade conflicts will start to undermine profits.

- European luxury shares slump -

The turmoil came a day after the International Monetary Fund slashed its global growth forecast on worries about trade wars and weakness in emerging markets.

Bourses in Paris and Frankfurt both lost more than two percent, while London fell 1.3 percent.

In Europe this week, the closely-watched spread between the rates on 10-year bonds in Italy compared with those offered by Germany, which is a measure of the added risk perceived by investors to holding onto Italian debt, hit the highest level since April 2013.

Markets have been shaken by a row between Brussels and Rome, which are at loggerheads after Italy’s populist government passed a purse-busting budget last week to the annoyance of the EU.

Not a glamorous day for shares in luxury goods companies

Shares in European luxury companies also lost much of their shine as investors feared that any slowdown in global economic growth would translate into dwindling sales for high-end firms. In Paris, shares in Kering fell nearly 10 percent, LVMH over seven percent and Hermes around five percent.

In other markets, oil prices fell on worries that Hurricane Michael will dent demand for gasoline and other petroleum products.

- Key figures around 2100 GMT -

New York - Dow Jones: DOWN 3.2 percent at 25,598.74 (close)

New York - S&P 500: DOWN 3.3 percent at 2,785.68 (close)

New York - Nasdaq: DOWN 4.1 percent at 7,422.05 (close)

London - FTSE 100: DOWN 1.3 percent at 7,145.74 (close)

Paris - CAC 40: DOWN 2.1 percent at 5,206.22 (close)

Frankfurt - DAX 30: DOWN 2.2 percent at 11,712.50 (close)

EURO STOXX 50: DOWN 1.7 percent at 3,266.90 (close)

Hong Kong - Hang Seng: UP 0.1 percent at 26,193.07 (close)

Shanghai - Composite: UP 0.2 percent at 2,725.84 (close)

Tokyo - Nikkei 225: UP 0.2 percent at 23,506.04 (close)

Euro/dollar: UP at $1.1523 from $1.1491 at 2100 GMT on Tuesday

Pound/dollar: UP at $1.3190 from $1.3143

Dollar/yen: DOWN at 112.35 from 112.96 yen

Oil - Brent Crude: DOWN $1.91 at $83.09 per barrel

Oil - West Texas Intermediate: DOWN $1.79 at $73.17 per barrel

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