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GLOBAL MARKETS-Dollar recovers despite Fed independence jitters, Europe stocks calm after French selloff
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GLOBAL MARKETS-Dollar recovers despite Fed independence jitters, Europe stocks calm after French selloff
Aug 27, 2025 3:12 AM

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European stocks calm after French selloff

*

Investors await pivotal Nvidia ( NVDA ) earnings after Fed drama

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Dollar recovers even as Fed independence worries linger

*

European markets calm after French selloff

(Updates at 0858 GMT)

By Yoruk Bahceli and Ankur Banerjee

LONDON/SINGAPORE, Aug 27 (Reuters) -

The U.S. dollar recovered on Wednesday even as investors

remained nervous about attacks on Federal Reserve independence,

while European shares steadied after a sharp drop a day earlier

with all focus on earnings from AI leader Nvidia ( NVDA ).

Concerns for U.S. Federal Reserve independence swirled as a

lawyer for Lisa Cook, whose firing President Donald Trump

ordered on Monday, said she would file a lawsuit against his

move.

Even so, the dollar rebounded on Wednesday from its drop

in the previous session and was up 0.4% against a basket of

currencies by 0858 GMT.

"If you think about near-term policy and the impact,

despite thinking that inflation can become unanchored when you

have a less independent central bank, Cook has been dovish

overall," said Justin Onuekwusi, chief investment officer at St.

James's Place.

"I think what concerns markets overall is the persistent

rhetoric on the Fed that can put the future independence of the

central bank into question," said Onuekwusi, adding that markets

appeared complacent about the attendant risks to policymaking.

The two-year U.S. Treasury yield, which typically

moves in step with interest rate expectations, hit its lowest

since May at 3.651% in Asian trade earlier.

The yield on the 30-year bond, which bore

the brunt of Tuesday's selloff, was last unchanged at 4.91%.

Trump has repeatedly criticised Fed Chair Jerome Powell and

policymakers for not cutting interest rates. Market watchers

interpreted Powell's comments at the Fed's annual Jackson Hole

symposium last week as indicating cuts could be on the way.

That has led to investors raising their bets on a rate cut

next month, with traders pricing in an 84% chance of the Fed

moving in September and expecting more than 100 bps of easing by

June 2026.

"I think investors are focused more on the upcoming payroll

print and what that means for a September rate move," said Ben

Bennett, APAC investment strategist at Legal and General

Investment Management.

The pan-European STOXX 600 index was trading flat on the

day after a nearly 1% drop on Tuesday, when French Prime

Minister Francois Bayrou's gamble to win backing for his deeply

unpopular debt-reduction plan backfired.

Bayrou's move to call a confidence vote on September 8 has

raised the risk that the euro zone's second largest economy

could soon face another collapse of the government. However,

French bonds calmed and stocks rose on

Wednesday following a sharp selloff a day earlier.

"What is key is whether or not we will be able to have a

budget by the end of the year," said AXA chief economist Gilles

Moec.

For the time being, markets were pricing in a repeat of

last year, when the French government ultimately pushed through

a budget, but market reaction could change if a new snap

election were called, he added.

NVIDIA ( NVDA )

U.S. stock futures were trading flat.

All focus turned to earnings from Nvidia ( NVDA ) later on Wednesday,

which will set the tone for how tech-concentrated U.S. equity

indexes, which have reached near record highs, will trade.

Data showed options traders are pricing in about a $260

billion swing in Nvidia's ( NVDA ) market value after the firm reports

earnings, where its business in China will be watched after an

unusual profit-sharing deal with the Trump administration.

Caught in the crossfire of a Sino-U.S. trade war, the fate

of Nvidia's ( NVDA ) China business hangs on where the world's two

largest economies land on tariff talks and chip trade curbs.

In Asia, Japan's long-dated government bond yields, which

have been under sustained pressure in recent months, rose to

fresh all-time highs on Wednesday following a weak result in the

Bank of Japan's regular debt purchase operations.

Chinese stocks, however, remain on the charge with the

blue-chip stock index hitting a three-year high

earlier in the day, buoyed by the tech sector.

In commodities, spot gold was 0.2% lower after

touching a two-week high in the previous session.

Oil prices were down 0.4% with the market on alert for fresh

developments in the war in Ukraine and investors weighing hefty

new U.S. tariffs on India, the world's third-biggest crude

consumer.

Both Brent crude and West Texas Intermediate crude

futures (CLc1> were down nearly 30 cents at $66.94 and $62.99

respectively.

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