FLASH
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Wall Street faltered, the dollar gave way and gold hit a new high on Monday as the Trump administration's threat to sue Federal Reserve Chairman Jerome Powell raised questions about the future independence of the world's most influential central bank.
Powell extremely flatly refused the Justice Department's subpoena service for grand jury subpoenas, while Morgan Stanley analysts called it a "cacophony of market-moving events" to begin what is only the second full week of 2026.
News that Trump was considering military action after a crackdown on protests in Iran added further tensions following the capture of Venezuela's Nicolas Maduro and the suggestion that the US might try to acquire Greenland.
Stocks fell, with the benchmark S&P 500 index down 0.1%, the Dow Jones Industrial Average 0.56% lower, and the Nasdaq Composite losing 0.04%.
The dollar index, measured against a basket of major currencies, fell 0.4% to 98.83, with the euro rising 0.33% to $1.1676.
“The point is that the central bank’s response function is likely to change fundamentally and in the long run if the White House succeeds” in gaining control of monetary policy, said Thu Lan Nguyen, head of currency and commodities research at Commerzbank, noting that the Federal Reserve is already in a rate-cutting cycle and that scenario only becomes relevant if inflation risks increase.
"However, since the foreign exchange market is future-oriented, this already justifies a higher risk premium for the US dollar today," she added.
Gold enjoyed its safe-haven status and rose 2.34% to $4,615.29 an ounce. Silver also rose.
Oil prices fell slightly after Iran said it had "complete control" of the situation following a weekend of violence. Traders also considered the possibility of further supply coming from Venezuela in a market that is likely to be oversupplied.
U.S. crude fell 0.42% to $58.89 a barrel and Brent fell 0.21% to $63.22 a barrel. Both benchmarks had risen last week as sanctions on Iran tightened.
Shares of lenders and credit card firms fell more than in other sectors, following Trump's call on Friday for a one-year cap on credit card interest rates at 10% starting January 20.
Developments being closely monitored this week include US inflation data, trade figures from China and a slew of US earnings starting with JPMorgan.
Deutsche Bank analysts listed the various factors that markets will need to weigh. "(Things) extraordinary and overall a lot of opportunity for big headlines over the coming days," they said in a note. /Adapted from Reuters /
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