Global Markets Decline Following Trump’s Fed Dismissal and Tariff Threats

Global stock markets faced notable declines on Tuesday, primarily driven by a series of disruptive announcements from US President Donald Trump. His controversial decision to dismiss Federal Reserve governor Lisa Cook and threats to impose new tariffs rattled investor confidence, reversing a recent upward trend.

Traders had experienced optimism following a speech by Jerome Powell, Chairman of the Federal Reserve, which indicated potential interest rate cuts. However, this confidence quickly dissipated as focus shifted to upcoming earnings reports, particularly from prominent AI chip manufacturer Nvidia, raising concerns about a potential technology bubble.

Market Reactions Across Asia and Europe

Asian markets reported mostly moderate losses on Tuesday, reflecting declines seen in New York and European markets the day prior. The main index in Hong Kong recorded a significant drop of 1.2 percent, closing at 25,524.92. Other major indices in Tokyo, Shanghai, Seoul, and Sydney also experienced downward trends, with Taipei being one of the few markets to gain slightly.

Morning trading in Europe mirrored this trend, with declines observed in London and Frankfurt. Notably, Paris saw a sharp drop of over 2 percent, spurred by rising concerns regarding a political crisis ahead of an important confidence vote next month.

Political Uncertainties and Economic Implications

Trump’s decision to remove Cook, citing allegations of false statements in relation to her mortgage agreements, has raised alarms about the independence of the Federal Reserve. This unusual move is likely to face legal challenges and has intensified scrutiny on Trump’s public demands for Powell to lower interest rates.

In response to the news, the dollar initially fell but later regained some ground after Cook affirmed her intention to remain in her role. The rise in gold prices, traditionally viewed as a safe-haven asset, further underscores investor unease.

“Trump’s announcement shows how increasingly politicised the central bank is becoming,” noted Neil Wilson, UK investor strategist at Saxo Markets. “The question for markets right now is about the September meeting, but be in no doubt that we are witnessing a regime shift like we have not seen in decades,” he added.

In addition to the Fed developments, Trump announced plans to impose “substantial additional tariffs” on countries that do not revoke digital taxes and regulations he argues are detrimental to US technology. He also hinted at potential export restrictions on “highly protected US technology and chips,” although specifics were not provided.

Looking ahead, attention will turn to a US GDP report scheduled for Thursday and a key inflation metric due on Friday. These reports are anticipated to provide insights into future interest rate movements.

Oil prices fell slightly on Tuesday, reversing recent increases amid ongoing speculation regarding a peace deal to resolve the conflict in Ukraine.

Key market figures at approximately 08:30 GMT included:

• Tokyo – Nikkei 225: DOWN 1.0 percent at 42,394.40
• Hong Kong – Hang Seng Index: DOWN 1.2 percent at 25,524.92
• Shanghai – Composite: DOWN 0.4 percent at 3,868.38
• London – FTSE 100: DOWN 0.6 percent at 9,263.86
• West Texas Intermediate: DOWN 0.9 percent at $64.19 per barrel
• Brent North Sea Crude: DOWN 0.8 percent at $68.25 per barrel
• New York – Dow: DOWN 0.8 percent at 45,282.47