New uncertainty is keeping traders on edge in France as the government faces a potential collapse over its budget plans.
The Paris CAC 40 fell around 2% after opening, the DAX in Frankfurt dipped by 0.5% and the FTSE 100 lost more than 0.6%.
Prime Minister François Bayrou has called for a confidence vote to back his almost €44 billion in budget cuts. However, he is risking another cabinet collapse, as the three main opposition parties said they would not back a confidence vote, set for the 8 September in the National Assembly, the lower house of the French Parliament.
French bonds saw a sell-off following the news, with the 10-year yields rising as much as 9 basis points on Monday, trading at 3.508%, its highest since March. The yield on the 30-year bond rose to 4.39%
The euro rose slightly against the dollar as the European markets opened, before falling again to $1.16.
In other currency trading, the US dollar dipped to 147.68 Japanese yen.
Gold was up in the morning by 0.2% at $3,424.30.
In energy trading, benchmark US crude dropped 0.9% to $64.21 a barrel. Brent crude, the international standard, declined 0.8% to $68.24 a barrel.
Investors watch attacks on the Fed
US markets closed with losses after President Donald Trump said on Monday night that he was firing Federal Reserve Governor Lisa Cook, effective immediately, because of allegations that she committed mortgage fraud. Cook said on Monday night that she would not step down.
The move from the Trump administration is unprecedented and would constitute a sharp escalation in his battle to exert greater control over the Federal Reserve, an institution that has long been considered independent from day-to-day politics.
Trump’s move is likely to trigger an extensive legal battle that will probably go to the Supreme Court, a scenario that could be disastrous for financial markets.
If Trump succeeds in removing Cook from the board, it could erode the Fed’s political independence, which is considered critical to its ability to fight inflation.
Asian markets
In Asia, shares declined following Wall Street’s dip, reversing some of the big gains picked up previously on hopes of interest rate cuts from the Federal Reserve.
Japan’s benchmark Nikkei 225 dove 1% in morning trading to 42,394.40. Australia’s S&P/ASX 200 declined 0.4% to 8,935.60.
South Korea’s Kospi lost around 1.1% after data showed improved consumer sentiment, strengthening expectations that the central bank won’t move on interest rates.
Hong Kong’s Hang Seng shed 1.2%, while the Shanghai Composite slipped 0.39%.
