LONDON, United Kingdom (AFP) — Major stock markets stumbled on Wednesday after reports that US President Donald Trump was close to firing the head of the Federal Reserve in a dispute over interest rates.

The yield demanded by investors in 30-year US bonds surged above five per cent meanwhile, indicating heightened anxiety over the prospect of Jerome Powell’s removal, which would break the tradition of the US central bank operating independently.

Europe’s main markets dropped at the close and Wall Street dipped, while the dollar lost more than one per cent against the euro following several media reports about Trump’s stance on Fed chairman Powell.

Trump later played down the rumours after being asked by reporters at the White House, saying it was “highly unlikely,” though he said he had not ruled it out.

The Fed has held its benchmark lending rate steady since its last reduction in December despite pressure from Trump.

The president has repeatedly lashed out at Powell for not cutting interest rates sooner.

On Tuesday, Powell repeated his message that the central bank was waiting for the impact of Trump’s tariffs before deciding on further rate cuts.

“As the US economy is in solid shape, we think that the prudent thing to do is to wait and learn more and see what those effects might be,” he said.

– Europe indexes dip –
Wall Street and Europe’s leading stock indexes gave up earlier modest gains made as traders weighed whether Trump’s trade tariffs could be fuelling inflation, raising pressure on the Fed for interest rate cuts.

Analysts said the latest relatively benign US inflation data had dampened the prospect of cuts, despite pressure from Trump as an August 1 deadline looms for his latest tariff threat to several economies.

After the June consumer price index showed increased pricing pressure following US tariffs, the producer price index was unchanged on a month-on-month basis, cooling from a 0.3 percent rise in May.

“Signs of tariff-driven inflation are already starting to show, as some companies begin passing on higher costs to consumers,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in a note.

Other analysts voiced caution on the tariffs’ effect.

“Looking into the underlying data, it was apparent that tariffs were not to blame for the inflation uptick” in June, said David Morrison, senior market analyst at finance group Trade Nation.

“Instead, it was the services side of the US economy which has seen the biggest cost increases. That would suggest that tariffs could add even more to inflation, making the Federal Reserve less likely to cut interest rates further, thereby stoking President Trump’s anger.”

Tech firms pared earlier strong gains Wednesday after US titan Nvidia said it would resume exports of key chips to China following Washington’s pledge to remove licensing curbs.

California-based Nvidia, one of the world’s most valuable companies, said Tuesday it would restart sales of its H20 artificial intelligence semiconductors to China, having been stopped by Trump’s tightened export licensing requirements in April.

CEO Jensen Huang said they would be shipping “very soon”.

– Key figures at around 1540 GMT –
New York – Dow: DOWN 0.5 percent at 43,789.22 points

New York – S&P 500: DOWN 0.6 percent at 6,206.16

New York – Nasdaq Composite: DOWN 0.7 percent at 20,525.19

London – FTSE 100: DOWN 0.1 percent at 8,926.55 points (close)

Paris – CAC 40: DOWN 0.6 percent at 7,722.09 (close)

Frankfurt – DAX: DOWN 0.2 percent at 24,009.38 (close)

Tokyo – Nikkei 225: FLAT at 39,663.40 (close)

Hong Kong – Hang Seng Index: DOWN 0.3 percent at 24,517.76 (close)

Shanghai – Composite: FLAT at 3,503.78 (close)

Euro/dollar: UP at $1.1704 from $1.1606 on Tuesday

Pound/dollar: UP at $1.3469 from $1.3383

Dollar/yen: DOWN at 147.06 yen from 148.85 yen

Euro/pound: UP at 86.90 pence from 86.69 pence

West Texas Intermediate: DOWN 1.1 percent at $65.78 per barrel

Brent North Sea Crude: DOWN 0.96 percent at $68.05 per barrel