*
European stocks calm after French selloff
*
Investors await pivotal Nvidia ( NVDA ) earnings after Fed drama
*
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.