Prolonged tensions between US President Donald Trump and the US’s Federal Reserve took a turn for the worse on Monday after the President said he fired Fed Res Governor, Lisa Cook, leading to another day of share market fall on the Wall Street.
The world shares showed a downward slide on Tuesday as benchmarks registered losses in Europe and Asia after Trump said he has sufficient reason to believe Cook committed mortgage fraud. Cook, the first African-American woman to serve on the Federal Reserve’s governing body, refused to quit, saying in a statement that “no causes exists under the law, and he [Trump] has no authority” to remove her from the job.
“I will continue to carry out my duties to help the American economy,” she stated in her email to reporters.
It's an unprecedented move that marks a sharp escalation in Trump's battle to exert greater control over what has long been considered an institution independent from day-to-day politics. Apart from rattling financial markets, it is likely to touch off an extensive legal battle that will probably go to the Supreme Court.
“Trump's decision to remove a sitting Fed governor has shaken confidence in the institution that underpins the world's financial system," Nigel Green of the financial advisory deVere Group, said in a commentary.
Also Read: Wall Street celebrates Powell’s hint at possible rate cut
With benchmarks reversing some of their big gains notched last week on hopes for interest rate cuts from the Fed, investors are now reacting with alarm because the independence of the central bank is critical to market stability, and any sign of political capture raises alarm bells everywhere.
In early European trading, the DAX lost 0.9 per cent to 24,065.00, while the CAC 40 in Paris slumped 2.1 per cent to 7,678.79. Britain's TFSE 100 gave up 0.7 per cent to 9,262.22.
The future for the S&P 500 lost 0.3 per cent while that for the Dow Jones Industrial Average lost 0.4 per cent.
In Asian trading too, most benchmarks declined, with Japan's benchmark Nikkei 225 diving nearly 1.0 per cent to finish at 42,394.40 and Australia's S&P/ASX 200 declining 0.4 per cent to 8,935.60.
South Korea's Kospi lost 1.0 per cent to 3,177.82 after data showed improved consumer sentiment, strengthening expectations that the central bank won't lower interest rates.
Hong Kong's Hang Seng also shed 1.1 per cent to 25,550.41, while the Shanghai Composite slipped 0.4 per cent to 3,868.38.
On Monday, the Wall Street, the S&P 500 fell 0.4 per cent. The Dow industrials closed 0.8 per cent lower and the Nasdaq composite shed 0.2 per cent.
Selling was widespread, with health care stocks among the biggest drags on the market. Pfizer fell 2.9 per cent and Eli Lilly and Co slid 2.3 per cent.
Also Read: Trump fires US Labor dept official; claims job data was rigged
However, gains for several big technology stocks helped temper the market's losses as Alphabet, Google's parent company, rose 1.2 per cent and technology heavyweight Nvidia rose 1 per cent.
Treasury yields rose in the bond market following their big drop on Friday amid expectations that the Fed will cut its benchmark interest rate in September.
The yield on the 10-year Treasury rose to 4.28 per cent from 4.25 per cent late Friday. The two-year Treasury yield rose to 3.73 per cent from 3.70 per cent late Friday.
Trump has been at loggerheads with the Federal Reserve since coming back to term this January, repeatedly asking the Fed’s chair, Jerome Powell, to resign for not cutting its short-term interest rate.
At the Jackson Hole symposium last week, Powell hinted at possible interest rate cuts in September, buoying investor sentiment.
Wall Street is still overwhelmingly betting that the Fed will cut interest rates at its next meeting in September by at least a quarter of a percentage point.
In energy trading, benchmark US crude lost 52 cents to $64.28 a barrel. Brent crude, the international standard, declined 48 cents to $67.74 a barrel.
In currency trading, the US dollar edged up to 147.70 Japanese yen from 147.77 yen. The euro was unchanged at $1.1620.
Follow us
