Longer-dated US Treasuries, shares tumble as Trump's Fed battle heats up

Bond

Stocks

Summary:

U.S. Treasuries and stocks slid as Trump’s firing of Fed Governor Lisa Cook stoked fears over central bank independence. French bonds and equities tumbled on looming government collapse, while gold rose and oil retreated.

Long-dated U.S. Treasuries and stock futures slipped on Tuesday after President Donald Trump said he was firing a Federal Reserve governor, an unprecedented move that fuelled investor concerns about the Fed's independence.

French stocks and bonds also tumbled as France's minority government looked increasingly likely to be ousted next month, raising the spectre of renewed political instability in one of the euro zone's biggest economies.

World stocks edged off this month's record highs, with focus on U.S. markets after Trump said he was removing Lisa Cook from the Fed's board of directors, citing alleged improprieties in obtaining mortgage loans. Cook said through her lawyers that Trump's "demands lack any proper process, basis or legal authority".

Gold prices touched a two-week high, U.S. equity futures fell and the dollar was on the back foot, as Trump also renewed tariff threats on trade partners.

Japan's Nikkei closed down almost 1% and Europe's broad STOXX 600 index was last down 0.6% as the U.S. president's latest salvo on the Fed muddied the outlook for Fed policy.

"Since he took office, Trump has managed to get his way on most things he has turned his attention to," said RBC BlueBay Asset Management Chief Investment Officer Mark Dowding.

"In this context, it may seem reasonable for markets to conclude that he may end up getting his way with the Federal Reserve."

In London trade, the benchmark U.S. 10-year Treasury yield rose 2.5 basis points to 4.30%, while 30-year bond yields rose 4 bps to 4.94%.

The two-year Treasury yield, which typically moves in step with interest rate expectations for the Fed, fell 2 bps to 3.71% as investors continue to anticipate lower rates.

Trump has regularly threatened to dismiss Fed Chair Jerome Powell, and earlier this month he fired a top Labor Department official after accusing her, without evidence, of manipulating jobs data that had disappointed him.

Trump, who lacks the legal authority to fire the Fed chair except "for cause", has backed away from that threat as Powell gets closer to the expiration of his term next May.

Cook's exit from the Fed could speed up the president's reshaping of the rate-setting Federal Open Market Committee. Her term had been due to end in 2038.

Extending months of turmoil over on-again, off-again tariff policies, Trump also threatened "subsequent additional" import duties on countries with digital taxes.

NVIDIA EARNINGS

In currency markets, the euro rose around 0.2% to $1.1642. The dollar was also a touch softer at 147.60 yen.

That all left the dollar index, which tracks the greenback against a basket of currencies, 0.2% softer after a 0.7% gain on Monday.

Tim Graf, head of macro strategy for EMEA, State Street, said he remained bearish on the outlook for the dollar.

"We've started to see a lot of selling of the dollar from institutional investors again," he said. "They are willing to build overweights in euros."

Friday's U.S. personal consumption prices reading, considered the Fed's preferred inflation gauge, could provide the next steer on the rate outlook, while in stock markets Nvidia earnings on Wednesday were also moving into focus.

"Nvidia earnings matter, it will give us insight into the AI space, as well as what's happening at the current poster-child for the tech sector," said Guy Miller, chief market strategist at Zurich Insurance Group.

"It will be interesting to see what guidance is given."

FRANCE WOES

In Europe, French bonds and stocks tumbled, particularly banking shares, as the minority government looked increasingly likely to be ousted next month.

Main opposition parties said they would not back the government in a September 8 confidence vote called by Prime Minister Francois Bayrou over his plans for sweeping budget cuts.

France's blue chip CAC40 index was last down 1.5% with banking giants BNP Paribas and Societe Generale bearing the brunt of selling.

France's 10-year government bond yield rose to 3.53%, its highest since March. When a bond's yield rises, its price falls.

"We are heading into budget season which is why this (French selloff) is happening," State Street's Graff said.

Elsewhere, oil prices fell after surging nearly 2% in the previous session as traders monitor developments surrounding the war in Ukraine and potential disruption to Russian fuel supplies.

Brent crude oil weakened 1.5% to $67.78 a barrel and U.S. crude fell 1.7% to $63.71.

Source: marketscreener

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Michelle

Economic

Forex

US orders for business equipment increased in July by more than projected, suggesting companies are moving forward on investment plans as some of the trade and tax policy uncertainty gradually diminishes.

The value of core capital goods orders, a proxy for investment in equipment that excludes aircraft and military hardware, increased 1.1% last month after a revised 0.6% decrease in June, Commerce Department figures showed Tuesday.

Bookings for all durable goods — items meant to last at least three years and including orders for commercial aircraft and military equipment — fell 2.8%. Earlier this month, Boeing Co. reported a fewer orders in July than in June.

Non-defense capital goods shipments including aircraft, which feed directly into the equipment investment portion of the gross domestic product report, rose 3.3%. Rather than orders, which can be canceled, the government uses data on shipments as an input to GDP.

Despite the gain, economists expect business investment to be soft for the remainder of the year before picking up in 2026 as companies take advantage of tax provisions after President Donald Trump signed the One Big Beautiful Bill. In the first half of this year, companies were largely cautious about capital spending because of erratic tariff announcements and concerns about demand.

In addition to a Boeing-related surge in business investment in the first quarter, companies ramped up spending on equipment to speed the use of artificial intelligence. AI and similar capital expenditures have the potential of boosting productivity for companies aiming to offset higher costs, including import duties.

The durables report showed orders for electrical equipment, computers, machinery and metals increased last month. Bookings for motor vehicles also picked up.

The government’s report showed core capital goods shipments, a less volatile metric that excludes planes and military hardware, rose 0.7% after an upwardly revised gain in the previous month.

Economists prefer the core equipment shipments figure to gauge underlying capital investment since there are extremely long times between ordering aircraft and military hardware and the actual shipment taking place.

Source: Bloomberg Europe

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Adam

Stocks

U.S. stock index futures slipped lower Tuesday after President Donald Trump’s abrupt removal of Federal Reserve Governor Lisa Cook sparked heightened concerns over the central bank’s independence.

At 05:55 ET (09:55 GMT), Dow Jones Futures fell 70 points, or 0.2%, S&P 500 Futures dropped 6 points, or 0.1%, and Nasdaq 100 Futures slipped 19 points, or 0.1%.

The major indices closed lower Monday, as the new week started with a losing session in the wake of Friday’s big rally. The blue chip Dow Jones Industrial Average dropped 0.8%, the broad-based S&P 500 fell 0.4% and the tech-heavy NASDAQ Composite slipped 0.2%.

Fed independence fears weighs

Sentiment took a hit Tuesday after Trump released a letter on social media announcing Cook’s removal, effective immediately.

Trump said the firing was tied to allegations of mortgage fraud, and that there was “sufficient cause” for her removal. The allegations were raised earlier in August by Federal Housing Finance Agency Director William Pulte.

Cook denied the allegations, and had stated that she would not be bullied out of her position.

But Trump’s announcement of her removal marks his latest attack against the Fed, with the president seen repeatedly attempting to exert more influence over the central bank. Cook is a member of the Fed’s seven-member rate-setting board.

Trump’s moves sparked heightened uncertainty over the Fed’s independence, with political interference in the central bank threatening to undermine U.S. economic credibility. The Fed has traditionally operated outside the government’s sphere of influence.

Trump had earlier this year also attempted to remove Fed Chair Jerome Powell, who had largely rejected the president’s calls to cut rates immediately.

Durable goods due

The chance of the Federal Reserve cutting interest rates at its next meeting in September received a boost at the end of last week following a speech by Powell at Jackson Hole.

With this in mind, investors will digest the latest durable goods orders and consumer confidence data, while the Case-Shiller Home Price Index and the Richmond Fed Manufacturing Index are also due later in the session.

Richmond Federal Reserve President Thomas Barkin is also set to speak.

On Thursday, the second estimate of second-quarter GDP and the latest weekly jobless claims are also due.

HSBC economists expect second-quarter GDP growth to be revised to an annualized 3.2% from the initial 3.0% estimate. In a recent note, they said that consumer sentiment will “remain subdued” in August, while July durable goods orders are likely to show a contraction.

Nvidia’s earnings loom large

Investors also turned largely cautious before closely-watched earnings from artificial intelligence major Nvidia (NASDAQ:NVDA), due on Wednesday. The company is regarded as a bellwether for AI and tech.

Nvidia’s earnings come amid growing doubts over the long-term prospects of AI– doubts which caused a sharp selldown in tech stocks last week.

Its results arrive as the second-quarter earnings season winds down, with S&P 500 profits tracking a 12.9% gain from a year earlier—well above the 5.8% rise expected at the start of July, according to LSEG IBES.

Nvidia is projected to report a 48% jump in per-share earnings on revenue of $45.9 billion for its fiscal second quarter, LSEG data show.

Crude slips lower

Oil prices fell, handing back some of the previous session’s outsided gains as traders closely monitored developments in the Russia-Ukraine conflict for potential disruptions to regional fuel supplies.

At 05:55 ET, Brent futures dropped 1.5% to $67.22 a barrel, and U.S. West Texas Intermediate crude futures fell 1.6% to $63.74 a barrel.

Both contracts rose to their highest in more than two weeks on Monday, gaining almost 2% as Ukraine struck Russian energy infrastructure, and with traders anticipating more U.S. sanctions on Russian oil.

Gold prices rose as safe haven demand was buoyed by increased concerns over Federal Reserve independence after Trump said he was firing Governor Lisa Cook.

Spot gold rose 0.2% to $3,373.14 an ounce, after earlier climbing to two-week highs, while gold futures for October rose 0.1% to $3,419.35/oz.

The Cook firing is Trump’s latest attack on the Fed, and comes as the president seeks to gain more influence over the Fed’s rate-setting activities.

Source: Investing

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Warren Takunda

Economic

GBP/CAD is relatively unchanged on last week's levels at 1.8664 at the time of writing Tuesday, and most observers paying a cursitory glance to the exchange rate will see relative stability.

But those paying closer attention will see a mighty battle is underway as the current level is at the top of a broader range; resolution will determine whether we fall back into the range or reach for new multi-year highs.

Momentum is currently with the Pound, which resides above the 200-day exponential moving averages, as well as other trend indicators for shorter-term timeframes.

The setup is broadly supportive and ultimately the charts speak of new highs over the coming months.

And yet, GBP/CAD has already effectively failed at the top of the March-August range, which is where we now are, on three occasions this year: it could yet be too soon to call it fourth time lucky for Sterling bulls.

Pound-to-Canadian Dollar Near-term Forecast: Battle Raging at the Highs_1

Above: GBP/CAD at daily intervals showing the supportive longer-term 200-day EMA. The technical battle now rages at the range highs where selling interest has traditionally overcome buyers.

If so, then a retreat back to 1.85, the middle of the range, becomes likely. This would allow the GBP/CAD to reconnect with the 200-day exponential moving average and reload for a fresh attempt higher.

The Pound isn't exactly the most attractive currency at the minute, provided weak economic fundamentals and the prospect of a major tax hikes in November.

But the problem for the Canadian Dollar is that it is tied to the U.S. Dollar, meaning GBP/CAD is closely aligned with GBP/USD.

Pound-to-Canadian Dollar Near-term Forecast: Battle Raging at the Highs_2

Above: GBP/USD (top) provides a lead for GBP/CAD

And GBP/USD is a function of USD, meaning the Dollar is dictating proceedings.

The Dollar has enjoyed a period of consolidation following a notable selloff in the first half of this year, but numerous currency analysts we follow think that further losses are to come.

The ongoing erosion of U.S. exceptionalism, elevated technology stock valuations and the steady assault on U.S. institutions by the Trump White House give reason to expect further USD weakness.

For GBP/CAD, that opens the door to new highs in the coming months and years.

Source: Poundsterlinglive

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Glendon

Economic

The traditional end of the US summer is days away and the kids are returning to school. So here are three things I have on my mind as the steamy August tariff nights give way to what may end up being a defining autumn.

1. Have we reached the peak for Trump’s tariffs? Or are there many more to come?

One of the oft-repeated lines in recent weeks has been that while Trump’s tariffs may have steadily ratcheted up to a level not seen since the 1930s at least they’ve brought an end to a dreaded uncertainty.

Yet with so-called secondary tariffs of 50% on Indian goods about to take effect at a minute past midnight tonight in Washington because of India’s imports of oil from Russia and major sectors like pharmaceuticals and semiconductors still waiting to learn what duties they will face, it seems premature to call an end to uncertain times. Or any top for that matter.

Moreover, in recent days Trump has announced new national security investigations into wind turbines and imported furniture. Late Monday he turned to social media to threaten nations that apply digital taxes with retaliation as well. Also looming this week is the end to immunity for small packages from US duties.

Then there’s the legal uncertainty hanging over Trump’s original Liberation Day tariffs with an appellate panel and the Supreme Court set to rule in the coming months whether the power Trump invoked was even legal.

2. Is this what the US-China economic relationship settles into? And is that ok?

Treasury Secretary Scott Bessent declared last week that he was satisfied with the state of tariffs and trade talks with China. And yet even the truce that Trump extended earlier this month feels fragile.

Trump on Monday hinted plans were afoot for him to visit Beijing either later this year or early next. Which may be the best signal that the coming months will see relative calm in relations between the world’s two largest economies.

But after that?

Maybe this is really what a new economic Cold War feels like. Perennial uncertainty and fear that either side could suddenly do something rash. Or that any misplayed incident could escalate quickly into economic Armageddon.

Trump’s comments Monday pointed to both an eagerness for peace through strength and a comfort with potential Armageddon.

“We have much bigger and better cards than they do,” he told reporters.

He also added later: “If we want to put 100%, 200% tariffs on, we wouldn’t do any business with China. And you know, it would be OK too.”

Which won’t comfort anyone who remembers how financial markets slumped the last time Trump imposed tariffs of more than 100% on imports from China.

3. What does the second-half economy look like in the US?

This is the biggest question on my mind.

Federal Reserve Chair Jerome Powell offered a fairly grim picture in his Jackson Hole speech last week. The US economy, he said, is seeing inflation rising again thanks to the clear effect of tariffs, growth and consumer spending slowing and the labor market weakening.

The good news came only for those who interpreted Powell’s description of a weaker US as a sign the Fed will rescue the economy and cut rates as soon as September. Which is what it did in 2019, the last time it saw tariffs dragging on growth.

The economy in the first half of this year grew at half the rate it did in the same six months of 2024. It’s hard to predict things getting better with even apparent good news recently looking uglier once you account for the oddness of this year.

In a note to clients yesterday Goldman Sachs economists pointed out that a weaker dollar this year has inflated corporate earnings with many companies’ offshore revenues looking stronger when converted into dollars .

On a year-on-year basis, real revenues for the S&P 500 minus a volatile energy sector were up 4.8% based on the just-concluded earnings season. And yet, they added: “On a constant-currency basis, real revenue growth slowed to 2.7% for the S&P 500 while revenue declined for mid- and small-cap companies.”

Beyond Wall Street you have to wonder about the impact on the US economy of having a million fewer immigrants, as the Pew Research Center recently calculated. Which is the first decline in America’s immigrant population since the 1960s.

Beyond that, what of a rural economy in which American soybean farmers are again getting restless over lost overseas markets?

There are, of course, other things on my mind.

Given the indignant responses to Trump’s tariff hikes of Indian Prime Minister Narendra Modi and Brazil’s Luiz Inacio Lula da Silva, are the BRICS about to accelerate their push back against American hegemony?

And where will all those Chinese goods once headed for American shores go?

Those first three, however, do feel like enough to contemplate for now as the summer sound of crickets fades.

—Shawn Donnan in Washington

Source: Bloomberg Europe

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Adam

Economic

Asia Market Wrap - Trump and FED Battle Heats Up

The Asian session saw a shaky start as US President Donald Trump posted on his Truth Social account that Federal Reserve Governor Lisa Cook will be removed effective immediately.

The immediate reaction saw a gauge of the US dollar retreat as much as 0.3% and gold rose as much as 0.6% to around $3385/oz.

The US dollar recovered some losses, and gold gave up some gains after Cook announced she wouldn’t resign. Asian stocks dropped 0.7%, and futures for US and European stock markets also declined.

Short-term Treasury yields fell, signaling increased expectations of a Fed rate cut next month. Meanwhile, 30-year yields rose as investors worried that easier monetary policy could lead to higher inflation.

President Trump made his announcement after the US Department of Justice said it would investigate Cook. This came from a criminal referral by Federal Housing Finance Agency Director Bill Pulte, accusing her of possible mortgage fraud.

This investigation is part of a broader effort by the Trump administration to increase legal pressure on Democratic figures and the central bank. Cook stated that Trump doesn’t have the power to fire her and that she won’t resign. Her lawyer, Abbe Lowell, said they will do whatever is necessary to stop Trump’s “illegal action.”

The Asian session also brought the RBA minutes of the August 11-12 meeting. The minutes showed that the central bank of Australia's board expects to lower interest rates further over the coming year to meet its policy objectives, with the pace of decline likely to hinge on economic data.

European Open - French Stocks Tumble on Political Jitters

French stocks dropped sharply, especially bank stocks, and the country’s bonds also fell on Tuesday as the government faces a growing risk of being removed next month.

Three major opposition parties said they won’t support a confidence vote scheduled for September 8, which Prime Minister Francois Bayrou called to push through major budget cuts.

France’s CAC40 stock index fell over 2%, after dropping 1.6% late Monday. Big banks like BNP Paribas and Societe Generale saw their shares drop more than 6%.

The yield on France’s 10-year government bond rose by 4 basis points to 3.53% early in the day, the highest since March, before settling at 3.50%. (When bond yields rise, their prices fall.)

The gap between French and German 10-year bond yields, which shows the extra risk investors see in holding French debt, widened to 79 basis points, the largest since April.

Analysts expected political tensions in France to rise in the fall as the government works to gain support for improving the country’s finances. However, Monday’s events were unexpected.

If Prime Minister Bayrou loses the confidence vote in the National Assembly, his government will collapse. President Emmanuel Macron could then appoint a new prime minister, ask Bayrou to lead a temporary government, or call for an early election.

Looking at major European indexes, the DAX was down as much as 1% in early trade but has since pared some losses trading around 0.54% at the time of writing. The industrials and financial sectors weighed on the index with losses of 1.28% and 1.58% respectively.

The FTSE 100 which enjoyed a good run last week with fresh all-time highs is also struggling this morning. The index is down around 0.8% at the time of writing with consumer cyclicals and financial the biggest losers on the day with Standard Chartered PLC down as much as 2.89%.

On the FX front, The euro and British pound stayed mostly unchanged against the dollar, trading at $1.1617 and $1.3461, respectively. Other currencies, like the Japanese yen and Swiss franc, also saw little movement.

The dollar index, which tracks the dollar against six major currencies, remained steady at 98.42 after recovering from an earlier 0.4% drop. Meanwhile, China’s offshore yuan traded at 7.1635 per dollar, near its strongest level in a month, as the stock market continued to rise.

Currency Power Balance

Oil prices dropped on Tuesday after rising nearly 2% the day before, as traders kept an eye on the war in Ukraine and possible disruptions to Russian fuel supplies.

Brent crude fell by 51 cents (0.7%) to $68.29 a barrel, after reaching its highest level since early August in the previous session. West Texas Intermediate (WTI) crude dropped 57 cents (0.9%) to $64.23.

Gold prices experienced whipsaw price action in the Asian session but has since steadied around the $3370/oz handle.

Economic Data Releases and Final Thoughts

Looking at the economic calendar, a quiet day ahead in terms of data. A few cCentral Bank speakers from the ECB, FED and BOE.

In the US session we will get the latest consumer confidence numbers before attention will likely turn to the ongoing battle between the FED and President Trump.

Geopolitical risks and the discussions between the US/Ukraine/Russia could also impact sentiment if there are any developments.

Chart of the Day - DAX Index

From a technical standpoint, the DAX index has been struggling to make a fresh high following the July 10 print at around the 24655 handle.

Since then we have seen two attempts to run toward this all-time high met with significant selling pressure resulting in a lower high being formed on July 24 and the most recent on August 15, when price reached 24547.

There is a bulls flag pattern in play on the daily chart which thus far has held firm but does bode well for a bullish breakout.

However, a deeper correction cannot be ruled out, and a lot of this will rest on sentiment in the days ahead.

For now though the index has found support with the 20 and 50-day MAs resting at 24163 and 24059 respectively, with the key psychological 24000 level just below.

This makes the 24000-24160 level a critical area of support, which if it holds could signal further upside.

Keep an eye on the period-14 RSI which for now is flirting with the neutral 50 level. A break below could be seen as a sign that momentum is shifting from bulls to bears while bounce at this level could embolden bulls and lead to a rally higher once more.

DAX Index Daily Chart, August 26. 2025

Source: marketpulse

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Winkelmann

Economic

Political

Cambodia’s National Assembly yesterday passed a controversial legal provision giving the government the authority to revoke the citizenship of any Cambodian national accused of “colluding” with foreign powers.The amendment to Cambodia’s 1996 Law on Nationality passed the parliament with the unanimous support of the 120 lawmakers present.

As with so many other changes to Cambodian laws, the amendment follows a call by former Prime Minister Hun Sen, who, during a visit to troops serving along the disputed border with Thailand in late June, said that the country needed a law to strip the citizenship of those who “side with foreign nations to harm our country.”

The change required an amendment to the country’s Constitution that was passed nearly unanimously through both houses of parliament and signed by King Norodom Sihamoni last month. Article 33 of the Constitution previously stated that Khmer citizens “shall not be deprived of their nationality.” This line has now been removed and replaced with a phrase stating that “acquisition and loss of Cambodian citizenship, including withdrawal, shall be determined by law.”

The amendment has been opposed by Cambodian civil society groups, 50 of which claimed in a statement earlier this week that the new provisions are “vaguely written, and will have a disastrously chilling effect on the freedom of speech of all Cambodian citizens.”“The potential for abuse in the implementation of this vaguely worded law to target people on the basis of their ethnicity, political opinions, speech, and activism is simply too high to accept,” the groups stated. “The government has many powers, but they should not have the power to arbitrarily decide who is and is not a Cambodian.”

In responding to these criticisms, Justice Minister Keut Rith told lawmakers ahead of yesterday’s vote that the bill was aimed at safeguarding sovereignty and national security and would “only apply to individuals who collude with foreign powers to damage Cambodia’s national interests.” He added, “Its purpose is to protect patriotism and the loyalty of the Khmer people.” Interior Minister Sar Sokha similarly told the Assembly that the conditions outlined in the law would “apply only to traitors.”

None of this is very reassuring given the Cambodian People’s Party (CPP)’s history of using accusations of “treason” and “collusion” to silence dissenters and political opponents. As I noted after last month’s constitutional amendment, the law will most likely be used against Cambodian opposition figures living abroad, many of whom also hold or have sought to acquire foreign citizenship.

The attempt to proscribe foreign collusion takes on additional salience in the context of the current border dispute with Thailand, which flared into a five-day conflict in late July. The conflict has prompted a remarkable alignment of Cambodian media and expert opinion behind Prime Minister Hun Manet’s government, and a widespread sense of national emergency.

These new legal powers will give the CPP government ever more powers to police the bounds of political discourse, while the border dispute will only lower the threshold of what constitutes foreign “collusion” or “treason.” Given the prevailing atmosphere of patriotic fervor, few are likely to sound any note of opposition if the government accuses a certain group or individual of undermining national security or colluding with any other foreign power.