Global markets experienced a decline on Tuesday following a series of announcements by US President Donald Trump, including the removal of Federal Reserve governor Lisa Cook and threats to impose new export controls and tariffs. This move has raised concerns about the independence of the central bank, which has been a subject of Trump’s public demands to lower interest rates.
Prior to Trump’s announcements, traders had been optimistic since US Federal Reserve Chairman Jerome Powell’s speech on Friday, which suggested potential interest rate cuts in the world’s largest economy. However, this confidence was short-lived, as attention turned to Nvidia’s earnings report, a bellwether for the tech industry, amidst concerns over a potential tech bubble.
Asian markets recorded moderate losses on Tuesday, with Hong Kong’s main index sliding 1.2% and Tokyo, Shanghai, Seoul, and Sydney also experiencing declines. In Europe, London and Frankfurt saw declines, while Paris plummeted over 2% due to fears of a French political crisis ahead of a crucial confidence vote next month.
Trump’s decision to remove Cook from her position has been met with criticism, and the dollar initially fell following the news before mostly recovering after Cook issued a statement vowing to continue in her role. Gold, perceived as a safe storage of wealth, advanced in value.
The US President also threatened to impose “substantial additional tariffs” on countries that do not cancel digital taxes and regulations, which he claims are designed to harm US technology. Furthermore, Trump announced plans to introduce export restrictions on highly protected US technology and chips, although details were not provided.
As the US GDP report and a key inflation gauge are set to be released on Thursday and Friday, respectively, investors are eagerly awaiting clues on the potential direction of interest rates in the coming months. Oil prices also declined on Tuesday, following recent increases amidst speculation about a peace deal to end the war in Ukraine.
Key market figures as of 0830 GMT included the Tokyo Nikkei 225 down 1.0% at 42,394.40, the Hong Kong Hang Seng Index down 1.2% at 25,524.92, and the London FTSE 100 down 0.6% at 9,263.86. The euro/dollar exchange rate stood at $1.1617, while the pound/dollar rate was up at $1.3467. West Texas Intermediate crude oil was down 0.9% at $64.19 per barrel, and Brent North Sea Crude was down 0.8% at $68.25 per barrel.
