World shares sink after Trump escalates feud with the Federal Reserve
[August 26, 2025] By
YURI KAGEYAMA
TOKYO (AP) — Shares sank Tuesday in Europe and Asia after President
Donald Trump announced he was firing Federal Reserve Governor Lisa Cook.
The announcement came after trading closed Monday on Wall Street, where
benchmarks reversed some of their big gains from notched last week on
hopes for interest rate cuts from the Fed. Trump said in a letter posted
Monday on his Truth Social platform that he was removing Cook because of
allegations that she committed mortgage fraud.
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.
“Investors are reacting 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% to 24,065.00, while the CAC
40 in Paris slumped 2.1% to 7,678.79. Britain's TFSE 100 gave up 0.7% to
9,262.22.
The future for the S&P 500 lost 0.3% while that for the Dow Jones
Industrial Average lost 0.4%.
In Asian trading, most benchmarks declined.
Japan's benchmark Nikkei 225 dove nearly 1.0% to finish at 42,394.40.
Australia's S&P/ASX 200 declined 0.4% to 8,935.60.
South Korea's Kospi lost 1.0% 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 shed 1.1% to 25,550.41, while the Shanghai
Composite slipped 0.4% to 3,868.38.
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A person, seen through a car window. walks in front of an electronic
stock board showing Japan's Nikkei index at a securities firm
Tuesday, Aug. 26, 2025, in Tokyo. (AP Photo/Eugene Hoshiko)
 On Monday, the Wall Street, the S&P
500 fell 0.4%. The Dow industrials closed 0.8% lower and the Nasdaq
composite shed 0.2%.
Selling was widespread, with health care stocks among the biggest
drags on the market. Pfizer fell 2.9% and Eli Lilly and Co. slid
2.3%.
Gains for several big technology stocks helped temper the market’s
losses. Alphabet, Google’s parent company, rose 1.2%. Technology
heavyweight Nvidia rose 1%.
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% from 4.25% late
Friday. The two-year Treasury yield rose to 3.73% from 3.70% late
Friday.
Trump has repeatedly attacked the Fed’s chair, Jerome Powell, for
not cutting its short-term interest rate, and even threatened to
fire him.
Wall Street is still overwhelmingly betting that the Fed will cut
interest rates at its next meeting in September. Traders see an 84%
chance that the central bank will trim its benchmark rate by a
quarter of a percentage point, according to data from CME Group.
In energy trading, benchmark U.S. 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 U.S. dollar edged up to 147.70 Japanese yen
from 147.77 yen. The euro was unchanged at $1.1620.
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