European Stocks Fall as Fed Uncertainty and Political Risks Weigh on Sentiment

Markets Slide Across the Region
European equities opened sharply lower on Tuesday, tracking Wall Street’s losses and pressured by renewed concerns over U.S. trade policy and domestic political instability in France. As of 03:35 ET (07:35 GMT), Germany’s DAX was down 0.5%, France’s CAC 40 slumped 1.8%, and London’s FTSE 100 slipped 0.6%.

Fed Independence in Question
Investor sentiment soured after U.S. President Donald Trump announced the firing of Federal Reserve Governor Lisa Cook, a move Cook has publicly rejected. She stated she will “continue to carry out my duties,” leaving the unprecedented dismissal in limbo. Legal experts expect the case could ultimately end up in the U.S. Supreme Court. This latest confrontation adds to fears that Trump is seeking greater influence over the Fed’s policymaking, undermining its independence.

Tariff Threats Over Digital Taxes
Adding to tensions, Trump threatened new tariffs on countries imposing digital taxes, unless those levies are repealed. The threat directly targets European nations that tax revenues of global tech giants such as Alphabet’s Google, Meta Platforms, Apple, and Amazon. Investors fear this could escalate into another trade conflict, potentially undermining the EU’s Digital Services Act.

French Political Instability Resurfaces
Uncertainty in France also weighed on regional sentiment. Prime Minister Francois Bayrou faces a confidence vote on September 8 over his budget plan. With the three main opposition parties refusing support, the risk of another government collapse looms. Should Bayrou lose, President Emmanuel Macron could appoint a new prime minister, keep Bayrou as caretaker, or call fresh elections. Macron already lost former PM Michel Barnier to a no-confidence vote in late 2024, highlighting the fragility of France’s political environment.

Corporate Movers

• British American Tobacco (LON:BATS): Shares slipped after CFO Soraya Benchikh resigned abruptly after just 15 months in the role.
• Bakkafrost (OL:BAKKA): Reported weaker Q2 earnings, hurt by lower salmon prices and additional costs in Scotland.
• TX Group (SIX:TXGN): Announced a three-year share buyback program despite reporting steep first-half declines in revenue, operating income, and profit.

Commodities Update

• Oil: Prices pulled back after Monday’s rally. Brent crude was down 0.6% to $67.78/barrel, and WTI crude slipped 0.8% to $64.29/barrel. The declines follow a near 2% surge on Monday after Ukrainian strikes on Russian energy infrastructure raised concerns over supply and potential new U.S. sanctions on Russian oil.
• Gold: Extended gains on safe-haven demand amid Fed uncertainty. Spot gold rose 0.2% to $3,373.99/oz, having earlier hit a two-week high, while October futures added 0.1% to $3,419.22/oz.

Outlook
With investor focus split between uncertainty over Fed independence, looming U.S. tariff threats, and political risks in France, European markets are set for a volatile week. Attention will remain on global trade developments and the unfolding constitutional challenge to Trump’s attempt to fire a Fed governor.