Asia: Stocks down after Trump Fed firing, tariff threats

ASIAN stocks retreated on Tuesday after a series of market-rattling announcements by US President Donald Trump, including the unusual firing of a central bank official and threats to impose export controls on microchips.

Traders had been riding a wave of confidence since Friday’s speech by US Federal Reserve Chairman Jerome Powell, which suggested coming interest rate cuts in the world’s largest economy.

But the upward flurry appeared to die out Monday on Wall Street as attention turned back to this week’s earnings report from AI chip giant Nvidia - a bellwether for the industry as concerns over a tech bubble mount.

Asian markets started Tuesday broadly lower, tracking drops made the previous day in New York and Europe.

Tokyo’s main index saw the largest fall, down over one per cent just ahead of the midday break. Benchmarks in Hong Kong, Shanghai, Seoul, Taipei and Sydney were also down.

Weighing on investors’ minds was Trump’s Monday evening announcement in the United States that he was removing Federal Reserve governor Lisa Cook, citing allegations of false statements on her mortgage agreements.

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The highly unusual step comes as worries grow about the independence of the central bank, fuelled by Trump’s repeated public demands on Powell to lower interest rates.

The dollar fell following the news, while gold - widely perceived as a safe storage of wealth - advanced.

“The independence of the Fed, already a fraying banner, looks tattered against the gusts of politics,” wrote Stephen Innes of SPI Asset Management in a note.

“What’s left is a central bank suddenly with a missing vote, a looming inflation test on Friday and a president willing to make personnel changes with the flair of a ringmaster cracking the whip,” he added.

Eyes are now turning toward a US GDP report on Thursday and a key inflation gauge coming on Friday for clues on how far interest rates might fall - or not -in the coming months.

Trump also vowed on Monday evening to impose “substantial additional tariffs” on shipments from countries that do not cancel digital taxes and regulations, which he said were “designed to harm” US technology.

He added a threat to introduce export restrictions on “highly protected (US) technology and chips”, without offering further details.

Oil prices crept down Tuesday, walking back increases made in recent days amid speculation about a peace deal to end the war in Ukraine. AFP