Wall Street futures decline ahead of Trump's announcement of new Fed chief; Nasdaq, Dow Jones down up to 1%

Wall Street futures see profit booking. 

• Wall Street futures fell as investors await Trump's Fed chair announcement.
• Kevin Warsh seen as frontrunner, raising concerns of a hawkish Fed stance.
• Asian and Indian markets also traded lower amid global uncertainty.

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Wall Street futures fell on Friday afternoon India time, pointing to a weak opening for US equities, as investors turned cautious ahead of US President Donald Trump’s announcement of the next Federal Reserve chief.

US stock index futures were down as much as 1 percent after Trump said he has finalised his choice for the new Fed chair, with reports indicating former Federal Reserve Governor Kevin Warsh as the frontrunner, according to Reuters.

Investor sentiment remained cautious over how US monetary policy could evolve after the end of current Fed Chair Jerome Powell’s term in May.

Trump said on Thursday that he would announce Powell’s successor on Friday. Bloomberg News reported that Warsh is likely to be named, while a person familiar with the matter told Reuters that Warsh met Trump at the White House on Thursday.

Market participants said Warsh is viewed as one of the more hawkish candidates, raising concerns that interest rates could remain higher for longer. A hawkish stance typically signals tighter monetary policy, which can increase borrowing costs and weigh on equity valuations.

"If the nominee is indeed Warsh, we could actually end up with a Fed that tilts hawkish at the margin," Sonu Varghese, global macro strategist at Carson Group in Chicago told Reuters.

At around 1:15 pm IST, Nasdaq 100 futures were down nearly 1 percent, while S&P 500 futures slipped about 0.8 percent. Dow Jones Industrial Average futures were also lower by around 0.8 percent.

Global markets came under pressure, with stocks falling while the dollar and US bond yields climbed after Trump said he had finalised his choice for the next chair of the Federal Reserve. Damien Boey, portfolio strategist at Wilson Asset Management in Sydney, told Reuters that Warsh has argued in favour of lower interest rates but has also pushed for a sharp reduction in the Fed’s balance sheet.

"The market reaction suggests investors are asking what the global landscape would look like with a much smaller Fed balance sheet," Boey added. On prediction market Polymarket, the implied probability that Trump will nominate Warsh jumped to 94 percent, from about 35 percent earlier in the session. The US dollar index, which tracks the greenback against a basket of six major currencies, rose 0.4 percent to 96.574, recovering part of its recent losses.

Tim Kelleher, head of institutional FX sales at Commonwealth Bank in Auckland, said the comments triggered immediate demand for the dollar. He added that Warsh is well known to financial markets and could help ease some near-term uncertainty.

Asian markets were mixed. South Korea’s Kospi traded higher, Japan’s Nikkei 225 was lower, China’s Shanghai SSE Composite index fell up to 1 percent, while Hong Kong’s Hang Seng index declined more than 1 percent.

Back home, domestic equity benchmarks also traded lower after a three-day rally. The BSE Sensex fell 547.05 points, or 0.66 percent to 82,019.31, while the NSE Nifty declined 165.45 points, or 0.65 percent to 25,253.45.

(With inputs from Reuters)

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