Will Trump Give Powell the Thumbs Down?

Nothing stirs Wall Street quite like a fresh instalment of its favourite political drama. Yesterday, Bloomberg reported that Donald Trump was likely to sack Jerome Powell - a rumour that briefly sent US indices into a tailspin. But markets recovered after the President publicly dismissed the idea just hours later, allowing Wall Street to close in positive territory. Europe was less fortunate. The session ended in the red, weighed down by steep losses in Renault and ASML, both of which cast a shadow over an otherwise directionless trading day.

Europe's benchmark index, the EuroStoxx 50, ended the session with a decline of just over 1%, weighed down by a sharp fall in one of its heaviest constituents: ASML. The Dutch semiconductor giant spooked investors by admitting it could no longer guarantee growth in 2026. The market's verdict was swift — its shares plunged 11%.

In Paris, the CAC 40 fared slightly better, retreating by 0.57%. The drop could have been steeper, had it not been for the relatively contained fallout from Renault, which tumbled 18.5% after issuing a profit warning late Tuesday. Renault's plunge dragged down fellow automaker Stellantis, which shed 6.2%.

Across the Atlantic, Wall Street had its own melodrama — centred on the spectre of Jerome Powell's dismissal. The threat has loomed for months, courtesy of Donald Trump. On Wednesday, Bloomberg reignited the firestorm, reporting that a White House source had confirmed Trump's intention to sack the Federal Reserve Chair. Markets shuddered: equities dipped, and long-term yields ticked upwards. But the panic was short-lived. Just hours later, the President declared such a move “highly unlikely”.

Despite the headlines, Powell's removal remains improbable. Such an act would constitute a political and financial shock of considerable magnitude. The market's precise reaction is unknowable — but likely to be turbulent, with equity indices falling and bond yields spiking. Few investors would relish the chance to “pay to find out”.

Rather than an outright dismissal, the more plausible strategy from the Trump camp is a campaign of sustained pressure. The goal? To compel Powell to step aside at the end of his term as Chair in May 2026. Crucially, he remains a Fed governor until January 2028. It is increasingly clear that the Trump administration would prefer not to have Powell pulling strings behind the scenes, even without the title.

Once this brief period of tension passed, US markets regained composure and ended the day in the green. The S&P 500 remains within touching distance — just 16 points — of last Thursday's record high. The Dow Jones climbed 0.53%, and the Nasdaq eked out a 0.1% gain.

Stepping back, the broader picture remains consistent: US indices are flirting with record highs, largely ignoring tariff threats and their potential consequences. While Trump may tout these market levels as vindication of his economic stewardship, investors appear to believe the threats are mostly rhetorical. The deadline of 1st August is widely expected to be deferred — as have all previous ones. In short, no one seriously expects the mooted tariff rates to be implemented. This market scepticism has become known as the “TACO trade” — Trump Always Chickens Out.

This week's inflation figures — CPI on Tuesday and PPI on Wednesday — offered the first concrete signs of tariff-related price pressures. While headline numbers were largely in line with expectations, or even slightly below, the granular details suggest early signs of inflationary impact. Most economists believe the bulk of the effects are yet to come.

Today's session will be shaped by US weekly jobless claims and retail sales figures. On the corporate front, earnings season picks up pace. TSMC reported second-quarter results this morning, while PepsiCo and Novartis are due later today. All eyes will be on Netflix, which is scheduled to report after the closing bell in New York.

Today's economic highlights:

On today's agenda: adjusted trade balance figures in Japan and real export figures in Switzerland; in the United Kingdom, unemployment claims and the 3-month ILO unemployment rate; in the eurozone, CPI month-on-month and year-on-year; in the United States, new unemployment claims, Philadelphia Fed business outlook, advance retail sales month-on-month, business inventories, and the NAHB Housing Market Index. See the full calendar here.

• GBP / USD: US$1.34
• Gold: US$3,337.56
• Crude Oil (BRENT): US$68.71
• United States 10 years: 4.48%
• BITCOIN: US$118,682

In corporate news:

• Coats Group PLC agreed to acquire OrthoLite Holdings LLC for $770 million and announced interim profit growth, alongside proposing a £250 million capital raise.
• Barclays fined £42 million for lapses in managing financial crime risks.
• Diageo CEO Debra Crew resigned after two years.
• NCC Group PLC is considering strategic options, including selling its cybersecurity division or a potential takeover.
• Audioboom Group expanded its UK podcast presence and reported a half-year profit by acquiring Adelicious for £10 million.
• AFC Energy PLC announced a significant cost reduction in its hydrogen generators and a new share placing priced at 10 pence each.
• Volvo Cars faced a challenging Q2 2025 with a net loss and decline in sales, despite beating revenue estimates.
• Novartis raised its 2025 earnings forecast and appointed Mukul Mehta as CFO after strong Q2 sales.
• Volvo Q2 2025 results exceeded expectations with an adjusted operating income of SEK 13.5 billion.
• Grieg Seafood sold operations in Norway and Canada to Mitsubishi Corp unit Cermaq for $993 million.
• Viaplay Group acquired Allente Group from Telenor, revising its 2025 outlook.
• Essity Q2 2025 results met expectations but showed a decline in revenue and profitability.
• Nordea Bank Q2 earnings slightly exceeded expectations.
• Johnson & Johnson strong financial results and raised 2025 forecasts boosted market sentiment.
• Meta shareholders filed lawsuits against CEO Mark Zuckerberg over data privacy mismanagement.
• TSMC Q2 profit surged to a historic high, despite US tariffs and a strong Taiwan dollar.

See more news from UK listed companies here

Analyst Recommendations:

• Quilter Plc: Investec maintains its buy recommendation and raises the target price from GBX 170 to GBX 180.
• Lloyds Banking Group Plc: Autonomous Research upgrades to outperform from neutral with a price target raised from GBP 0.76 to GBP 0.86.
• Barclays Plc: Autonomous Research maintains its outperform recommendation and raises the target price from 3.95 to GBP 4.
• Marks & Spencer Group Plc: Investec maintains its buy recommendation with a price target raised from GBX 435 to GBX 450.
• Integrafin Holdings Plc: Investec maintains its hold recommendation and raises the target price from GBX 325 to GBX 375.
• Standard Chartered Plc: Mediobanca maintains its underperform recommendation with a price target reduced from 1010 to GBX 990.
• Hsbc Holdings Plc: Mediobanca maintains its neutral recommendation with a price target reduced from 880 to GBX 860.
• Wizz Air Holdings Plc: Barclays upgrades to equalweight from underweight with a target price raised from 9 to GBP 11.
• Lloyds Banking Group Plc: Keefe Bruyette & Woods upgrades to outperform from market perform with a price target raised from GBX 75 to GBX 90.
• Whitbread Plc: Barclays maintains its equalweight recommendation with a price target raised from 30 to GBP 30.20.