Asian stocks market opened the week on a cautious note, retreating after a series of market-shaking announcements by US President Donald Trump, which included the unexpected firing of a Federal Reserve governor and new threats of export controls targeting advanced technology and microchips.
Investors had been buoyed by optimism stemming from US Federal Reserve Chairman Jerome Powell’s speech last Friday, which hinted at potential interest rate cuts.
This optimism, however, faltered as global traders refocused on geopolitical tensions, corporate earnings, and emerging risks to the US economic landscape.
Tokyo’s Nikkei 225 index led the declines, shedding 1 per cent to close at 42,394.40, while Hong Kong’s Hang Seng Index fell 0.8 per cent to 25,621.83. China’s Shanghai Composite and South Korea’s Kospi followed similar downward trends, closing 0.4 per cent and 0.5 per cent lower, respectively.
Sydney also saw a modest decline, reflecting broader risk-averse sentiment. Notably, Taipei bucked the regional trend with a slight uptick, signaling selective investor optimism.
European markets mirrored Asia’s cautious stance, with London’s FTSE 100 down 0.7 per cent at 9,258.70, Paris’s CAC 40 slipping 0.6 per cent, and Frankfurt’s DAX retreating 0.5 per cent in early trading.
At the center of the market jitters was Trump’s announcement Monday evening that Federal Reserve Governor Lisa Cook would be removed from her post over alleged false statements on mortgage agreements.
Such a move is virtually unprecedented and sparked immediate debate over the independence of the central bank.
Market analysts warn that the intervention could unsettle US monetary policy, increasing volatility across both equities and forex markets.
“The independence of the Fed, already under pressure, looks severely compromised against the gusts of political interference,” said Stephen Innes of SPI Asset Management.
“The central bank now faces not only a missing vote but also heightened scrutiny as the US approaches key inflation and GDP reports later this week.”
Compounding uncertainty, Trump signaled intentions to impose “substantial additional tariffs” on countries that refuse to withdraw digital taxes or regulations, and hinted at potential export restrictions on sensitive US technology and microchips.
Analysts fear that these threats could stoke trade tensions and disrupt global supply chains, particularly in the semiconductor and electronics industries.
Investors also eyed upcoming corporate earnings, especially AI chip leader Nvidia, whose results are expected to set the tone for the broader tech sector.
With concerns about a tech bubble mounting, cautious positioning has dominated trading strategies across Asia and the US.
Amid heightened volatility, gold advanced as investors sought safe-haven assets.
Oil prices, meanwhile, retreated modestly, influenced by speculation over a potential peace settlement in the Ukraine conflict.
West Texas Intermediate fell 0.7 per cent to $64.32 per barrel, while Brent crude declined 0.6 per cent to $68.37.
Currency markets reflected the tension, with the US dollar initially dropping following the Fed governor announcement before partially recovering.
The euro/dollar pair traded at $1.1609, while the dollar/yen rose to 147.83, highlighting risk-off sentiment among forex traders.
The convergence of political interference in monetary policy, trade protectionist threats, and high-stakes corporate earnings has heightened global market uncertainty.
Analysts warn that upcoming US GDP and inflation reports will be critical in shaping investor expectations and determining whether the Fed can maintain credibility while navigating political pressures.
Market participants are also keeping a close watch on broader global implications.
Emerging markets, particularly those reliant on technology imports and exports, could face increased headwinds if US tariffs and export restrictions materialize.
Asian markets are navigating a complex web of political, economic, and corporate pressures.
While optimism from the Fed’s potential rate cuts provided temporary buoyancy, Trump’s actions and tariff threats have injected fresh uncertainty.
Investors are advised to monitor upcoming economic data, corporate earnings, and policy announcements closely, as these factors will likely define market direction in the near term.