Powell under fresh fire from Trump admin as prosecutors open criminal investigation into Fed reno

Mid-Market Update: Powell under fresh fire from Trump admin as prosecutors open criminal investigation into Fed reno; Still waiting on Supreme Court ruling; Iran protests receive US military focus.

Notes/observations

- Risk sentiment softens as markets digest an escalating clash between the White House and the Federal Reserve after federal prosecutors opened a criminal investigation into Chair Powell tied to HQ renovation cost overruns. Powell framed the probe as political pressure to force faster rate cuts, reviving concerns about Fed independence and a higher “risk premium” on USD assets. Iran, Greenland diplomacy, and Venezuela remain live risk factors but are currently secondary to the Fed-independence shock. USD slipped ~0.3% and USD/CHF drops to a five-day low as the Swiss franc attracts the clearest safe-haven bid. The yen is less responsive despite earlier USD/JPY strength, with Japan politics and BOJ-hike expectations in focus.

- US Senator Thom Tillis has vowed to block all Federal Reserve confirmations until the DOJ’s inquiry into Chair Powell is resolved, framing the investigation as a direct threat to the central bank's independence. While WSJ’s Nick Timiraos notes that the Board could vote for Powell to serve as "Chair pro tempore" to avoid a leadership vacuum, Powell himself has characterized the conflict as a fundamental battle to preserve the Fed's ability to set rates based on economic evidence rather than political intimidation.

- Generally, European indices pulled back from record closes with banks and autos dragging, partially offset by strength in defense and precious-metal miners (benefiting from the gold/silver move).

- On metals, gold prints fresh record highs above ~$4,600/oz, while silver spikes ~5-6%. Copper extends its record run, holding above $13,000/ton as mine disruptions, tight inventories, and US tariff uncertainty spur stockpiling into the US and tighten availability elsewhere. Aluminum also grinds higher.

- Notable catalyst on Tues with US inflation reading and still waiting on US Supreme Court opinion ruling on Trump tariffs; Markets brace for a high-wire week where geopolitics and guidance collide.

- The 2026 earnings season opens with investors laser-focused on AI capex and opex signals, while TSMC’s Jan 15 results may set the tone for the entire semiconductor cycle. In Washington, Rubio’s Greenland meeting and a possible Russia sanctions bill test America’s global leverage just as Trump weighs Iran options and his early-2026 Fed pick. Meanwhile, traders eye Oracle’s rumored $40B debt splash for clues on how much liquidity this market can still stomach.

- Micron executive warned that severe memory shortages will persist until at least 2028, as complex facility expansions and rigorous AI certification standards delay any meaningful supply relief. This prolonged scarcity is driven by an overwhelming surge in data center demand, which now accounts for up to 60% of the market and has left the entire industry struggling to secure necessary inventory.

- Asia closed higher with Nikkei225 outperforming +1.6%. EU indices -0.9% to +0.1%. US futures -0.9% to -0.7%. Gold +1.8%, DXY -0.3%; Commodity: Brent -0.2%, WTI +0.1%; Crypto: BTC +0.1%, ETH +0.4%.

Asia

- South Korea Jan Exports 10 Days Y/Y: -2.3% v +17.3% prior; Imports 10 Days Y/Y: -4.5% v 8.0% prior.

- Australia Nov Household Spending M/M: 1.0% v 0.6%e; Y/Y: 6.3% v 5.5%e v 5.6% prior.

- Japan PM Takaichi said to be planning to call for a snap election as early as mid-Feb.

Global Conflict/tensions

- US said to step up planning for possible action in Iran; Aides of President Trump were expected to brief the President Tuesday on measures [including military, cyber and economic].

Europe

- France Min Montchalin stated that if the government fell there would be no possibility of having a budget before the March municipal elections.

Americas

- US. Attorney’s office in District of Columbia opened a criminal investigation into Fed Chair Jerome Powell over the central bank’s of its Washington headquarters.

- Powell responded that the threat of criminal charges was a consequence of Fed's setting interest rates based on its assessment of the public interest rather than the president's preferences.

-US Republican Senator Tillis injected more possible uncertainty into the process of selecting the new Fed Chairman.

- Goldman Sachs analyst pushed back expected 25bps rate cuts by US Fed from March and June to June and Sept, respectively.

- Treasury Sec Bessent: MBS buybacks aim to match Fed's $15B monthly roll-off.

Energy

- Treasury Sec Bessent stated that Washington could lift some sanctions on Venezuela as soon as next week.

- President Trump stated that did not like the Exxon response to Venezuela and might 'keep Exxon out. Added that they were playing too cute.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.17% at 608.62, FTSE +0.06% at 10,130.60, DAX +0.13% at 25,291.64, CAC-40 -0.26% at 8,339.99, IBEX-35 -0.86% at 17,497.03, FTSE MIB -0.38% at 45,545.50, SMI +0.07% at 13,421.90, S&P 500 Futures -0.99%].

Market Focal Points/Key Themes: European indices opened generally lower and remained under pressure through the early part of the session; AEX notable exception in the green, supported by ASML; loss or risk appetite attributed to geopolitical concerns and tensions between Trump and Powell; among sectors managing gains are consumer discretionary and technology; sectors leading the way lower include industrials and financials; tech sector supported following Micron outlook; reportedly Eli Lilly looking acquire Abivax; earnings expected in the upcoming US session include Brunello Cucinelli.

Equities

- Consumer discretionary: Heineken [HEIA.NL] -4.0% (CEO to step down).

- Financials: UBS [UBSG.CH] -1.5% (rejects proposed Swiss bank rules, moots less costly alternatives), Barclays [BARC.UK] -3.0% (Trump calls for a one year cap of 10% on card interest rates), Plus500 [PLUS.UK] +1.0% (trading update).

- Healthcare: Abivax [ABVX.FR] +20.0% (Lilly ready to offer €15B for Abivax).

- Technology: BE Semiconductor [BESI.NL] +8.5% (trading update; Micron exec comments).

Speakers

- ECB’s De Guindos (Spain): Volatility has remained stable amid market correction fears.

- ECB's Muller (Estonia) stated that Trump's pressure on Powell was purely political.

- US Ambassador to India Gor: To continually engage with India on trade including security and technology.

- Iran Foreign Min Araqchi claimed that situation was under total control. Stressed that since Pres Trump pointed at intervention, protests turned bloody to give excuse for US intervention. Possibility of foreign military intervention in Iran was "very low".

- China issued progress of China-EU consultations on EV which reached agreement with EU on EV prices arrangement.

Currencies/fixed income

- USD was on soft footing after US DOJ opened an investigation into Fed Chair Powell over his handling of the central bank’s renovation costs. Sell America theme not fully taken root as markets still expect Trump to appoint a credible successor to Powell and let that person steer policy. Nonetheless precious metals hit fresh record highs over concerns of central bank independence.

- EUR/USD still contained within recent trading ranges, last seeing the pair probe the 1.17 area.

- USD/JPY off its session highs to test 157.75 during the NY morning. Fiscal concerns did push the yen beyond the 158 level during Asia earlier.

- 10-year German Bund yield last at 2.86%, France 10-year Oat at 3.52% and 10-year Gilt yield at 4.38% 10-year Treasury yield: 4.20%; 10-year JGB: 2.08%.

Economic data

- (FI) Finland Nov Current Account Balance: -+€0.1B v -€0.2B prior.

- (SE) Sweden Dec Budget Balance (SEK): -127.8 v +4.5B prior.

-(DK) Denmark Dec CPI M/M: -0.4% v -0.3% prior; Y/Y: 1.9 v 2.1% prior.

- (DK) Denmark Dec CPI EU Harmonized M/M: -0.4% v -0.5% prior; Y/Y: 1.9% v 2.0% prior.

- (HU) Hungary Nov Industrial Production M/M: -2.0% v 0.0%e; Y/Y: -5.4% v -2.3%e.

- (CH) Swiss Dec SECO Consumer Confidence: -30.7 v -33.0e.

- (CH) Swiss Weekly Total Sight Deposits (CHF):459.8 B v 452.4B prior; Domestic Sight Deposits: 435.8B v 426.4B prior.

- (EU) Euro Zone Jan Sentix Investor Confidence: -1.8 v -4.9e.

Fixed income issuance

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 3-month Bills; Avg Yield: 4.00% v 4.06% prior; Bid-to-cover: 4.03x v 1.44x prior.

Looking ahead

- (DE) Germany Nov Current Account Balance: No est v €14.8B prior.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (IN) India Dec CPI Y/Y: 1.6%e v 0.7% prior.

- 05:30 (DE) Germany to sell €5.0B combined in 6-month and 12-month bubills.

- 06:00 (TR) Turkey to sell bonds (2 tranches).

- 06:00 (IL) Israel to sell combined ILS2.9B in 2028, 2031, 2033, 2035, 2042 and 2056 bonds.

- 06:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 06:30 (CH) Chile Central Bank Economist Survey.

- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 08:00 (ES) Spain Debt Agency (Tesoro) size announcement on upcoming issuance.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 09:00 (FR) France Debt Agency (AFT) to sell €6.7-7.9B in 3-month, 6-month and 12-month bills.

- (DE) Germany Nov Current Account Balance: No est v €14.8B prior.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 12:00 (US) USDA World Agricultural Supply and Demand Estimates (WASDE) Crop Report.

- 12:00 (FR) ECB's Villeroy (France).

- 12:30 (US) Fed’s Bostic.

- 12:45 (US) Fed’s Barkin.

- 13:00 (US) Treasury to sell 3-Year Notes.

- 13:00 (US) Treasury to sell 10-Year Notes Reopening.

- 16:00 (NZ) New Zealand NZIER Business Opinion Survey.

- 18:00 (US) Fed’s Williams.

- 18:30 (AU) Australia Jan Westpac Consumer Confidence Index: No est v 94.5 prior.

- 18:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index.

- 18:50 (JP) Japan Nov Current Account Balance: ¥3.609Te v ¥2.834T prior; Adjusted Current Account: ¥3.036Te v ¥2.476T prior; Trade Balance (BoP Basis): ¥518.8Be v ¥98.3B prior.

- 18:50 (JP) Japan Dec Bank Lending Y/Y: No est v 4.2% prior; Bank Lending (ex-trusts) Y/Y: No est v 4.5% prior.

- 19:01 (UK) Dec BRC LFL Sales Y/Y: No est v 1.2% prior.

- 20:01 (IE) Ireland Dec Construction PMI: No est v 46.7 prior.

- 23:00 (SG) MAS to sell 4-week and 12-week bills.