Most US indexes ended slightly lower in light trading before the Labor Day holiday, though small caps outperformed and the Dow briefly hit a record high. NVIDIA’s strong earnings helped ease concerns about the AI-driven rally, though the stock dipped afterward. Political drama emerged as President Trump announced the firing of Fed Governor Lisa Cook (though later blocked by the Court), prompting legal action and raising concerns about Fed independence. Fed Governor Waller reiterated support for a September 25 bps rate cut and further easing. July’s core PCE inflation stayed at 0.3% m/m, while GDP growth for Q2 was revised up to 3.3%. Consumer confidence slipped, but jobless claims improved modestly. Treasury prices rose, with short- and intermediate-term yields falling, partly due to strong demand at bill auctions and Fed-related uncertainty.
The STOXX Europe 600 fell 1.99% as concerns over renewed tariff risks, French political instability, and fading hopes for peace in Ukraine hurt sentiment. France’s CAC 40 dropped 3.33%, Italy’s FTSE MIB 2.57%, Germany’s DAX 1.89%, and the UK’s FTSE 100 1.44%. ECB minutes showed divisions on inflation: some saw downside risks from weak growth and tariffs, while others warned of longer-term upside risks from energy and currency moves. At Jackson Hole, officials suggested more cuts were unlikely soon, though discussions could resume if growth weakens. Inflation data were mixed, with Germany and Spain showing strength but France easing. In the UK, retail sales fell for an 11th straight month, while shop prices rose sharply.
