European markets showed little immediate concern over former U.S. President Donald Trump’s weekend threat to impose 30% tariffs on EU and Mexican imports starting next month. With the Bastille Day holiday in France and a slow start to the week’s events, investors seemed to downplay the threat.
The euro and European stocks moved only slightly lower, reflecting a belief that much could still change before implementation. Italy’s Foreign Minister Antonio Tajani confirmed that the EU had prepared retaliatory tariffs worth over €21 billion if no deal is reached, but officials emphasized continued dialogue.
While equity markets barely reacted, European bond yields, particularly in Germany and France, rose significantly. This movement was not entirely attributable to the tariff threat, but rather broader fiscal concerns and global political risks. France’s President Emmanuel Macron announced an acceleration of defense spending, potentially straining budgets further.
Additionally, bond markets in Japan and elsewhere also saw yield spikes due to domestic political uncertainties and upcoming elections that could lead to looser monetary policy.
Fed Independence Under Pressure Amid Trump Criticism And Rising Inflation Concerns From Investors
Market anxiety is increasingly focused on the Trump administration’s intensifying criticism of Federal Reserve Chair Jerome Powell. Despite Trump’s previous claim that he wouldn’t remove Powell before the end of his term, his frequent attacks have sparked fears for the Fed’s independence. Economic adviser Kevin Hassett hinted that Powell’s job could be at risk over alleged mismanagement and budget overruns. Trump is also demanding significant rate cuts—up to three percentage points—even as inflation remains elevated.
European Markets Steady Despite Trump’s Tariff Threat as Bond Yields Rise on Broader Fiscal FearsThe uncertainty over Fed leadership and pressure for aggressive rate cuts have made investors nervous, particularly in the bond markets. Thirty-year Treasury yields neared 5%, and Wall Street futures turned negative after a weak performance the prior Friday. There’s growing concern that political interference in monetary policy could undermine the Fed’s credibility and stoke inflationary pressures, especially with looming risks from labor shortages and wage inflation tied to immigration policies.
Commodities, Crypto And CPI Data Drive Market Focus Amid Trade And Policy Uncertainty
Despite geopolitical tensions and growing trade policy volatility, oil prices remained robust, climbing to a three-week high. Investors are watching for further U.S. sanctions on Russia, which could affect global supply. Meanwhile, U.S. corn exports are projected to reach record levels, but analysts warn of potential logistical and trade hurdles. In Asia, Chinese stocks and the yuan rose as exports showed strength in June, with firms pushing to fulfill orders before possible tariff escalations.
Bitcoin surged past the $120,000 mark for the first time, driven by optimism surrounding upcoming U.S. legislation that may finally deliver long-anticipated regulatory clarity for the cryptocurrency sector. At the same time, investors are closely watching Tuesday’s release of June U.S. CPI data for signs of how existing tariffs might be influencing consumer costs.
The second-quarter earnings season is also set to kick off, with major U.S. banks leading the charge. Attention remains fixed on how central banks and governments will manage the growing economic and political turbulence.
