Global markets recoiled after the U.S. Justice Department issued grand jury subpoenas to the Federal Reserve and its chair, Jerome Powell, in an extraordinary escalation that threatens a criminal indictment and raises questions over the independence of the central bank.
In a video statement released Tuesday, Powell said the subpoenas relate to his June testimony, without providing further details. The move marks an unprecedented confrontation between federal prosecutors and the institution charged with setting U.S. monetary policy.
The fallout was swift. S&P 500 futures fell 0.6%, while gold surged 2% to a record $4,595 an ounce, buoyed by the shock to U.S. institutions as well as simmering geopolitical tensions in Iran and Venezuela.
In Asia, China’s equity markets pushed higher, with stocks gaining about 1% on average. Turnover on the country’s domestic exchanges reached a record $516 billion on Monday, underscoring the speed and scale of the market’s recovery. Japan’s markets were closed for a holiday.
Europe opened largely flat, reflecting investor caution as attention remained fixed on Washington. The clash between the Justice Department and the Fed added a new layer of uncertainty to global markets already grappling with geopolitical risks and shifting expectations for monetary policy.