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Asian stock markets began the last week of August with sharp declines due to escalating trade tensions between the United States and China, which weighed on confidence in the global economy, caused a stampede of stock market investors, and an increase in the demand for safe assets such as government bonds and gold.

The yields of the 10-year US Treasury debt fell to their lowest level since mid-2016, while gold reached its highest level since April 2013, after China announced the imposition of new tariffs on American products worth $75 billion.

The president of the United States, Donald Trump, responded immediately by announcing additional tariffs of 550 billion dollars on Chinese products. In addition, Trump said on Twitter that he had ordered the large companies in his country to seek alternatives to China immediately and to re-manufacture their products at home.

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The Federal Reserve lowered interest rates by 0.25% for the first time since December 2008. But at the press conference following the meeting of the Federal Open Market Committee, Fed Chairman Jerome Powell said that this rate cut was a timely adjustment and not necessarily the beginning of a prolonged cycle of rate cuts.

Wall Street stocks fell sharply during Powell’s intervention because traders interpreted that there would be no further rate cuts this year. The Fed president cited the global economic slowdown, trade war and moderate inflation as reasons to reduce interest rates by 25 basis points.

Powell also spoke about Donald Trump’s political pressure on the central bank and said the rate cut was not the result of the president’s calls, who had requested a 50 basis point reduction a day before the Fed meeting.

However, it should be noted that not all FOMC officials agreed with the decision, Boston Fed President Eric Rosengren and Kansas Fed President Esther George voted to keep interest rates without changes

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Equity markets start the week lower after expectations of an aggressive interest rate cut by the US Federal Reserve and rising tensions in the Middle East fade.

At the end of last week comments from New York Fed President John Williams, noting that FOMC members could not wait for the economic slowdown to hit them to introduce monetary stimulus, raised expectations that the central bank would lower the interest rates to 50 basis points at the meeting from July 30 to July 31.

But Wall Street stock markets closed lower last Friday, after the Fed contradicted Williams’ comments saying he was referring to a possible 25 basis point cut, not 50 points. The main US indices closed with falls of 0.25% in the Dow Jones, 0.62% in the S&P 500 and 0.74% in the Nasdaq.

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