Markets jittery as Trump targets Powell
Asian stocks have stuttered while oil prices stabilised and the euro was perched at a 3 and a half year high as investors weighed geopolitical, economic and fiscal uncertainties and braced for US President Donald Trump's deadline on tariffs.
Markets have been soothed by a ceasefire between Israel and Iran that appeared to be holding, reducing the risks of disruptions to the global oil trade and underpinning sentiment.
MSCI's broadest index of Asia-Pacific shares outside Japan was little changed in early trading, as the rally in Wall Street took a breather overnight. Tokyo's Nikkei rose 0.9 per cent to a four-month high.
The US dollar selling kicked up a notch after a media report said Trump has toyed with the idea of selecting and announcing Federal Reserve Chair Jerome Powell's replacement by September or October in a bid to undermine his position.
That pushed the euro to its strongest level since November 2021. It last fetched $1.6805. The Swiss franc firmed to a decade-high while the Japanese yen strengthened 0.35 per cent to 144.70 per dollar.
Trump has repeatedly criticised Powell for not cutting interest rates and has floated the idea of firing him or naming a successor soon, denting investor confidence in US assets and undermining the central bank's independence.
"I think it's a given that Trump's pick to succeed Powell, when it comes, will be one that sits at the highly dovish end of the spectrum and will support Trump's agenda of lowering interest rates," said Tony Sycamore, market analyst at IG.
"The issue with this is it will resurface questions from earlier in the year around the Fed's independence, which, as we saw, undermines confidence in the Fed and the USD."
The dollar index, which measures the US currency against six rivals, wallowed at its lowest level since March 2022. The index has slid 10 per cent this year as investors, worried by Trump's tariffs and their effect on US growth, look for alternatives.
Financial markets remain on edge over Trump's chaotic trade policies as the clock ticks down to his July 9 deadline for trade deals.
Powell, who resumed two days of congressional testimony on Wednesday, said Trump's tariff plans may well just cause a one-time jump in prices, but the risk it could fuel more persistent inflation is large enough for the central bank to be careful in considering further rate cuts.
Fed officials still expect to cut interest rates this year, but the timing is uncertain as officials wait on looming trade deadlines and for more certainty about the scope of the tariffs that will be imposed and the ways that rising import levies influence prices and economic growth.
"No one knows exactly how tariffs will impact inflation, which will keep central banks in conservative mode, particularly the Fed," said Bank of America strategists, noting downside risks to global growth remain relevant, not only due to trade wars but also due to geopolitical developments.
"We are carefully monitoring fiscal policy across key countries that can affect global interest rates. Unsustainable fiscal dynamics can trigger an accident in bond markets," they said in a note.
In commodities, oil prices inched higher to continue recovering after a volatile month so far due to the conflict between longtime rivals Israel and Iran.
Brent crude futures rose 0.2 per cent to $67.82 a barrel, while US West Texas Intermediate crude (WTI) gained 0.28 per cent to $65.1.
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More than $16 billion was wiped from superannuation balances at the start of the year as uncertainty over Donald Trump's tariffs impacted Australians' net worth. The nation's collective household wealth grew by 0.8 per cent to $17.3 trillion in the first three months of 2025, the Australian Bureau of Statistics reported on Thursday. But it would have increased by more if not for the value of super accounts falling for the first time since September 2022 as global uncertainty weighed on share prices, ABS head of finance statistics Mish Tan said. The increase in wealth was again mainly driven by an increase in residential property values, which rose 1.2 per cent to $125.3 billion. House prices have rebounded from a brief slowdown at the end of 2024 as interest rate cuts boosted buyer demand. With as many as three more cuts predicted by December, and market expectations rising for the next one as soon as July, property values are set to keep growing. Superannuation balances fell by 0.4 per cent, or $16.4 billion, as Mr Trump's tariff threats sparked fears of trade disruption and slower economic growth. Equity markets reacted even more violently when Mr Trump unveiled his "liberation day" tariffs on April 2, but share prices have since recovered as tensions eased between the US and China. However, the US president poses another risk to super funds. The $4.2 trillion industry has warned that a section of Mr Trump's proposed "big beautiful bill" would include a "revenge tax" on investors from countries that have imposed taxes on US investors and companies the administration deems unfair. With more than $600 billion of investments parked in the US, super funds have warned the tax could deal a multibillion-dollar hit to returns. In a conversation with his US counterpart, Treasurer Jim Chalmers on Wednesday urged Scott Bessent to spare Australian investors. "We do not want to see our investors and our funds unfairly treated or disadvantaged when it comes to developments out of the US Congress," Dr Chalmers said. "And once again, I'm very grateful to Scott Bessent for hearing me out and for also undertaking to make what progress he can to try and resolve these issues. I'm confident he understands these issues." With more demand for mortgages, household borrowing grew 1.4 per cent, or $2.4 billion, reducing the overall growth in wealth by 0.2 percentage points. "The RBA's cash rate cut in February this year was the first easing of interest rates since November 2020, giving some relief to household budgets in the March quarter through lower mortgage interest payments," Dr Tan said. "We expect to see the broader impact of recent cuts, including another in May, on house prices and credit growth later this year." Three of Australia's big four banks predict the Reserve Bank will cut interest rates by 25 basis points at its next meeting on July 8 following better-than-expected inflation numbers. Despite predictions of inflation remaining steady, headline inflation for May fell to 2.1 per cent from 2.4 per cent the previous month, driven by a drop in the cost of fuel and rental prices. Trimmed mean inflation, which removes volatile price movements, dropped from 2.8 per cent to 2.4 per cent. Westpac analysts joined those from NAB and Commonwealth Bank in bringing forward their next forecast for rate cuts to July, with ANZ the last holdout of the big four tipping August. But Westpac chief economist Luci Ellis said a July cut was no shoo-in, with Australia's tight labour market and slow productivity growth still making the Reserve Bank uneasy about inflation pressures. A 25 basis point reduction in the cash rate would shave $90 off monthly repayments for a mortgage holder with a $600,000 loan. More than $16 billion was wiped from superannuation balances at the start of the year as uncertainty over Donald Trump's tariffs impacted Australians' net worth. The nation's collective household wealth grew by 0.8 per cent to $17.3 trillion in the first three months of 2025, the Australian Bureau of Statistics reported on Thursday. But it would have increased by more if not for the value of super accounts falling for the first time since September 2022 as global uncertainty weighed on share prices, ABS head of finance statistics Mish Tan said. The increase in wealth was again mainly driven by an increase in residential property values, which rose 1.2 per cent to $125.3 billion. House prices have rebounded from a brief slowdown at the end of 2024 as interest rate cuts boosted buyer demand. With as many as three more cuts predicted by December, and market expectations rising for the next one as soon as July, property values are set to keep growing. Superannuation balances fell by 0.4 per cent, or $16.4 billion, as Mr Trump's tariff threats sparked fears of trade disruption and slower economic growth. Equity markets reacted even more violently when Mr Trump unveiled his "liberation day" tariffs on April 2, but share prices have since recovered as tensions eased between the US and China. However, the US president poses another risk to super funds. The $4.2 trillion industry has warned that a section of Mr Trump's proposed "big beautiful bill" would include a "revenge tax" on investors from countries that have imposed taxes on US investors and companies the administration deems unfair. With more than $600 billion of investments parked in the US, super funds have warned the tax could deal a multibillion-dollar hit to returns. In a conversation with his US counterpart, Treasurer Jim Chalmers on Wednesday urged Scott Bessent to spare Australian investors. "We do not want to see our investors and our funds unfairly treated or disadvantaged when it comes to developments out of the US Congress," Dr Chalmers said. "And once again, I'm very grateful to Scott Bessent for hearing me out and for also undertaking to make what progress he can to try and resolve these issues. I'm confident he understands these issues." With more demand for mortgages, household borrowing grew 1.4 per cent, or $2.4 billion, reducing the overall growth in wealth by 0.2 percentage points. "The RBA's cash rate cut in February this year was the first easing of interest rates since November 2020, giving some relief to household budgets in the March quarter through lower mortgage interest payments," Dr Tan said. "We expect to see the broader impact of recent cuts, including another in May, on house prices and credit growth later this year." Three of Australia's big four banks predict the Reserve Bank will cut interest rates by 25 basis points at its next meeting on July 8 following better-than-expected inflation numbers. Despite predictions of inflation remaining steady, headline inflation for May fell to 2.1 per cent from 2.4 per cent the previous month, driven by a drop in the cost of fuel and rental prices. Trimmed mean inflation, which removes volatile price movements, dropped from 2.8 per cent to 2.4 per cent. Westpac analysts joined those from NAB and Commonwealth Bank in bringing forward their next forecast for rate cuts to July, with ANZ the last holdout of the big four tipping August. But Westpac chief economist Luci Ellis said a July cut was no shoo-in, with Australia's tight labour market and slow productivity growth still making the Reserve Bank uneasy about inflation pressures. A 25 basis point reduction in the cash rate would shave $90 off monthly repayments for a mortgage holder with a $600,000 loan.
