Financial markets presented a mixed picture on Monday, with Asian shares gaining ground while U.S. stock futures declined. This divergence came as investors digested the news of a potential legal threat against Federal Reserve Chair Jerome Powell, marking a fresh escalation in the long-running tensions between the central bank and the White House.
Legal Cloud Over the Fed Chair
The Department of Justice has issued subpoenas to the Federal Reserve, a development confirmed by Chair Jerome Powell. The investigation reportedly centres on Powell's past testimony regarding the Fed's extensive $2.5 billion renovation of two office buildings, a project President Donald Trump has repeatedly criticised as excessive. This move raises the spectre of a criminal indictment, adding a layer of political uncertainty to the central bank's operations.
In a brief interview, President Trump denied any knowledge of the investigation aimed at Powell. When questioned if the probe was a tactic to pressure the Fed on interest rates, Trump responded, "No. I wouldn't even think of doing it that way." Powell's current term as chair is set to conclude in May, and administration officials have hinted that a potential replacement could be named soon.
Market Reaction: Asia Up, US Futures Down
Despite the unsettling political development, global markets appeared to take the news in their stride, though with clear regional variations. U.S. equity futures pointed to a lower opening, with contracts for the S&P 500 and the Dow Jones Industrial Average falling 0.5%. The tech-heavy Nasdaq composite futures saw a steeper decline of 0.8%.
In contrast, major Asian indices traded firmly in positive territory. Hong Kong's Hang Seng and the Shanghai Composite each rose 0.4%. South Korea's Kospi added 0.4%, while Australia's S&P/ASX 200 gained 0.4%. Taiwan's Taiex outperformed with a 1% jump. Japanese markets were closed for a holiday.
Traditional safe-haven assets saw buying interest, with the price of gold rising 1.9% and silver jumping 4.8%. In currency markets, the U.S. dollar strengthened slightly against the Japanese yen.
Friday's Record Rally and Sector Moves
The cautious start to the week followed a record-setting session on Wall Street last Friday. U.S. stocks climbed to new all-time highs after a mixed jobs report. The data showed employers hired fewer workers than expected in December, but the unemployment rate improved. This reinforced views of a resilient, "low-hire, low-fire" labour market that could help the economy avoid a recession while giving the Fed room to delay further interest rate cuts.
The S&P 500 climbed 0.6% to 6,966.28, the Dow Jones added 0.5% to 49,504.07, and the Nasdaq composite led with a 0.8% gain to 23,671.35.
Several sectors saw significant movement. Power company Vistra soared 10.5% after signing a major 20-year deal to supply electricity to Meta Platforms, highlighting the surge in demand from Big Tech companies for powering AI data centres. The housing sector rallied after President Trump announced a plan to purchase $200 billion in mortgage bonds to lower rates. Homebuilders like Lennar and D.R. Horton surged between 7-9%.
On the downside, General Motors fell 2.7% as it announced a massive $6 billion charge related to its strategic pullback from electric vehicles, citing weaker demand due to fewer tax incentives and relaxed emission rules.
As the week begins, market participants are balancing robust corporate deals and economic data against the backdrop of heightened political risk surrounding the world's most influential central bank.
