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US stocks jumped on Wednesday after Donald Trump said he had no plans to fire Federal Reserve chair Jay Powell, easing worries about the independence of the American central bank that had rocked markets this week.
The S&P 500 climbed 3.2 per cent in morning trade, while US Treasuries and European equities also made strong gains.
The moves built on Tuesday’s rebound for the Wall Street benchmark, which rose 2.5 per cent as Trump indicated a potential easing of trade tensions with Beijing, saying that tariffs on Chinese goods would “come down substantially”.
The president also reiterated his frequent complaint that the Fed needed to cut borrowing costs, but added: “I don’t want to talk about that because I have no intention of firing [Powell].”
“Markets will welcome his (begrudging) vote of confidence, but the damage to Fed independence has been done,” said Dario Perkins, of consultancy TS Lombard, in a note to clients. “Trump wants rate cuts, but his vicious attacks on Powell have made it harder for the central bank to deliver.”
The broad Stoxx Europe 600 index rose 2 per cent on Wednesday, and Germany’s Dax index extended recent gains with a 3.2 per cent rise.
The 10-year US Treasury yield fell 0.06 percentage points to 4.33 per cent, continuing a recent decline after sharp increases earlier this month. Bond yields move inversely to prices.
The US dollar gained 0.5 per cent against a basket of peers, although the currency continues to hover around multiyear lows having dropped more than 8 per cent this year so far.
Wednesday’s moves come after a volatile month for financial markets following Trump’s so-called “liberation day” tariff announcements triggered a sharp slump in US equities. The S&P 500 remains more than 7 per cent lower so far this year despite rebounding this week.
Technology stocks have been hit even harder, with the Nasdaq Composite index shedding more than 12 per cent since the beginning of the year. The Nasdaq climbed 4.2 per cent on Wednesday.
Markets were further rattled last week after Trump, who has been a persistent critic of Powell, signalled he believed he could dismiss the Fed chair before the end of his term in May 2026.
Salman Ahmed, global head of macro and strategic asset allocation at Fidelity International, described the confrontation between the White House and the Fed as “a manifestation of a fundamental tension” in the economy.
He said Trump’s tariff policies had “put pressure on the dual mandate of the Fed” by increasing inflationary pressures while also hurting growth.
“That tension is not going to go away fundamentally until we know where the tariffs are going to settle,” Ahmed said. “The day-to-day newsflow is going to lead to elevated volatility.”
Additional reporting by Ray Douglas
