European Markets Fall as Trump-Powell Tensions Rattle Global Investors

European stocks closed lower on Wednesday following rising political tension in the U.S., where a White House official claimed President Donald Trump is “likely” to fire Federal Reserve Chair Jerome Powell. The Stoxx 600 index, which tracks a broad range of European equities, ended the day 0.6% lower after initially showing modest gains. Technology shares were the hardest hit, slumping 2.2%, while the insurance sector stood out as a rare gainer, climbing 0.5%.

Market jitters intensified after CNBC reported that Trump consulted lawmakers about firing Powell and received favorable responses. Although the president later told reporters he was “highly unlikely” to remove Powell, the initial uncertainty was enough to shake global confidence. The Federal Reserve, under Powell, has signaled caution in reacting to Trump’s tariffs, opting to wait for clearer economic indicators before making any rate adjustments.

Earlier in the session, European markets had shown cautious optimism. The Stoxx 600 was slightly up by 0.06% by mid-afternoon, with financial services gaining 0.9% while auto stocks dropped 1.3%. Traders were also reacting to higher-than-expected U.K. inflation at 3.6%, but expectations remain strong—at about 80%—that the Bank of England will cut interest rates in August due to signs of a softening labor market.

In geopolitical news, EU Trade Chief Maros Sefcovic traveled to Washington D.C. for high-stakes meetings regarding possible U.S. tariffs on European goods. While many investors doubt the feasibility of a sweeping 30% blanket tariff, analysts warn that the threat remains credible if EU negotiators don’t yield on certain points. The trade tension adds another layer of complexity to already volatile markets.

On the corporate front, shares of drinks giant Diageo rose as much as 4% before settling closer to 1% after the company announced that CEO Debra Crew would step down. CFO Nik Jhangiani was named interim CEO amid challenges such as weak post-pandemic spirits sales and concerns over U.S. trade policies. Meanwhile, shares in Renault fell 18% after the automaker slashed its 2025 outlook and named an interim CEO, adding to the negative sentiment in European markets.

Source: CNBC