Asian Stocks Set to Shrug Off Trump’s Fed Threats: Markets Wrap

u{t89tkq6j)haf]bg69vgdy)_media_dl_1.png Bureau of Labor Statistics

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(Bloomberg) — Asian stocks were primed to track US gains that pushed shares to fresh highs, as sentiment remained buoyant despite the Trump administration’s escalating attacks on the Federal Reserve.

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Equity index futures for Australia and Hong Kong rose, while those for Japanese benchmarks climbed almost 4% after a public holiday and as the yen weakened further. The S&P 500 overcame early declines to finish 0.2% higher, setting a new record. 

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Treasuries sold off across the curve and the dollar declined, while precious metals rallied with gold and silver touching fresh highs.

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Upward momentum in equity markets indicated investors are looking through any potential compromise to the Fed’s ability to independently set interest rates. On Sunday, Fed Chair Jerome Powell said the central bank had been served grand jury subpoenas from the Justice Department threatening a criminal indictment.

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The Fed’s perceived independence from government whims is a bedrock assumption of markets, and any change to that perception could weigh on sentiment. While independence risks will likely be a key theme in 2026, Krishna Guha at Evercore says there are two ways to interpret US markets stabilizing.

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“The first is this does not matter to markets,” he said. “The second is it matters a lot, but partly for this reason investors think this move is going nowhere and the administration will look for a de-escalation off ramp. We are firmly in the second camp.”

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Fund managers at big bond firms like Pacific Investment Management Co., PGIM and DWS Group, have warned that Trump’s assault on the Fed is at odds with his goal of pulling down interest rates. Instead, the pressure is adding a new risk into markets that could push bond yields higher.

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The latest salvo between the Trump administration and the Fed comes as investors navigate a chaotic backdrop. The president has taken aim at credit card companies, homebuilders and defense contractors — while also considering a US role in the Iranian protests after capturing Venezuela’s leader earlier in January. Late Monday Trump said he would impose a 25% tariff on any country that’s “doing business” with Iran.

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Separately, the Trump administration is closing in on a tariff agreement with Taiwan, according to a person familiar with the matter.

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The yen touched the weakest level in around a year against the greenback, which itself declined against a basket of currencies Monday. The US currency’s “trained haven status,” indicates further weakness, TD Securities strategists led by Jayati Bharadwaj wrote in a note to clients.

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Inflation, Earnings

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“After shrugging off last week’s geopolitical surprises, US markets face domestic political headlines,” said Chris Larkin at E*Trade from Morgan Stanley. “Barring additional surprises, the markets will likely turn their attention to earnings and inflation data.”