Much of the early action took place in Japan, where stock prices jumped after returning from vacation. The yen rose as much as 0.2% to 157.90 per dollar after Treasury Secretary Satsuki Katayama said she told U.S. Treasury Secretary Scott Bessent she was concerned about one-way moves in the yen. Japanese government bond yields rose sharply amid speculation that Prime Minister Sanae Takaichi could dissolve parliament as early as next month.Asian shares, relatively cheaper after three years of gains, face key risks this week from US inflation data and a possible Supreme Court ruling on President Donald Trump’s tariffs. The momentum in stocks suggested investors are looking beyond the U.S., where renewed Trump administration attacks on the Federal Reserve have raised concerns about the independence of central banks.
“Non-US assets such as European and Asian stocks are likely to look better, mainly due to cheaper valuations and as US foreign policy becomes more unpredictable,” said David Chao, global market strategist at Invesco Asset Management, which oversees more than $2 trillion.
Asian stocks are cheaper compared to US benchmarks. The MSCI Asia Pacific index trades at about 15 times earnings, compared with about 22 times for the S&P 500 and 25 times for the Nasdaq 100, according to data compiled by Bloomberg.
On Sunday, Fed Chairman Jerome Powell said the central bank had received grand jury subpoenas from the Justice Department threatening criminal charges. Valuations in Asia are also cheaper than government bonds which sold across the curve and the dollar fell during the US session. Precious metals rose, with gold and silver hitting new highs after the Trump administration escalated its attacks on the Fed.
The U.S. currency’s trained haven status signals further weakness, TD Securities strategists led by Jayati Bharadwaj wrote in a note to clients.
The Fed’s perceived independence from the whims of government is a fundamental assumption of the markets, and any change in that perception could weigh on sentiment. While independence risks are likely to be a major theme in 2026, Evercore’s Krishna Guha said there are two ways to interpret the stabilization of US markets.
“The first is that this is not important for the markets,” he said. “The second thing is that it matters a lot, but partly for this reason investors think this move will go nowhere and the government will look for a de-escalation-off-disaster. We are firmly in the second camp.”
Fund managers at major bond companies such as Pacific Investment Management Co., PGIM and DWS Group have warned that Trump’s attack on the Fed runs counter to his goal of lowering interest rates. Instead, the pressure adds new risk to markets, which could push bond yields higher.
The latest salvo between the Trump administration and the Fed comes as investors navigate a chaotic backdrop.
The president has targeted credit card companies, home builders and defense companies – while also considering a US role in the Iranian protests after capturing the Venezuelan leader earlier in January. Late Monday, Trump said he would impose a 25% tariff on any country that “does business” with Iran.
“After shaking off last week’s geopolitical surprises, US markets are facing domestic political headlines,” said Chris Larkin of Morgan Stanley’s E*Trade. “Barring further surprises, markets are likely to turn their attention to earnings and inflation data.”
In addition, the Trump administration is nearing a tariff deal with Taiwan, according to a person familiar with the matter.
A key risk for markets this week is Tuesday’s US inflation. The U.S. consumer price index, considered a measure of underlying inflation because it excludes volatile food and energy costs, rose 2.7% in December from a year earlier.
U.S. fourth-quarter earnings start in earnest later this week and are expected to show healthy performance, according to Bloomberg Intelligence’s Michael Casper and Wendy Soong. Based on current estimates, the S&P 500 constituents are expected to post earnings growth of 8.4% in the fourth quarter and 14.6% in 2026. Excluding the “Magnificent Seven” megacaps, earnings growth is projected at 4.6% and 13.3%, respectively, they say.
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