He has discussed firing Federal Reserve Chairman Jerome Powell over the central bank’s interest rate increases, which Trump and his allies blame for the market plunge, though he concluded over the weekend it wasn’t within his power, according to Treasury Secretary Steven Mnuchin.

The latest run of selling has come amid White House turmoil led by Trump and a gridlocked US government.

Mnuchin recommended Powell’s nomination, raising speculation that Trump could turn his wrath to the Treasury secretary, whom he can more easily dismiss. But Trump said Tuesday he retains confidence in Mnuchin and called him “very talented”.

US stocks extended their month-long sell-off ahead of the Christmas break amid a lengthening list of downside risks, in particular those sparked by the Trump administration including a renewed attack on the Federal Reserve by Trump.

Two weekend tweets by Mnuchin – on the strength of the financial system and the tenure of Fed chairman Jerome Powell – further frayed investors’ nerves and set the tone for a shortened Christmas Eve session.

The VIX, or Wall Street’s favourite fear measure, spiked more than 18 per cent to 35.76 by the 1pm close in New York; it has more than doubled this month.

The main benchmarks were hammered: the Dow Jones Industrial Index fell 653 points or 2.9 per cent. The S&P 500 Index fell 2.7 per cent; the Nasdaq Composite fell 2.2 per cent.

Meanwhile Christmas Day brought no presents for the Japanese sharemarket, as the Nikkei 225 Stock Average plunged below 20,000 and slipped into a bear market.

The Nikkei 225 sank 5 per cent on Tuesday for the biggest single-day drop since November 2016, taking its cue from US equities, which tumbled during a shortened trading day on Christmas Eve.

It followed the broader Topix index into a bear market with a 21 per cent decline from a high on October 2.

For Hajime Sakai, the chief fund manager at Mito Securities Co in Tokyo, a combination of panic selling and a lack of buyers in thin holiday trading suggests the declines may have further to run.

“Market sentiment is too weak,” Sakai said. “Investors are selling emotionally as the markets keep declining. There are no buyers as liquidity has dropped during the Christmas holidays and year-end.”

Japanese equities are being caught up in a global equity sell-off spurred by everything from concerns about the US-China trade war to central bank policy tightening and political uncertainty in the US, where the country’s government is partially shut down over the Christmas period.

The rout has become so pronounced in Japan that the Topix is heading for its worst December on record.

Some analysts pointed to instability in Trump’s government as one reason for the declines.

With Timothy Moore

Bloomberg

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