Trump administration faces fallout from DOJ Powell subpoena

Good morning. Here's what happened overnight and what you need to know today.

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1.

Powell prosecuted: The Trump administration is facing mounting political and institutional fallout after the Federal Reserve disclosed it had been served grand jury subpoenas from the Department of Justice over Chair Jerome Powell’s June 2025 congressional testimony on headquarters renovations. Powell said the move “should be seen in the broader context of the administration’s threats and ongoing pressure,” and framed the dispute as a test of whether the Fed can continue setting interest rates based on evidence rather than “political pressure or intimidation”. In an interview, Trump denied knowledge of the investigation. Republican Senators Thom Tillis and Lisa Murkowski said they will oppose any Trump Fed nominees until the matter is resolved. And three former Fed chairs and four former Treasury secretaries condemned the probe and warned it risks undermining US central bank independence and resembles practices in “emerging markets with weak institutions”. (Bloomberg)(Capital Brief)

2.

Markets react: US stocks, bonds and the dollar slipped early on Wall Street after the Trump administration escalated its attack on Jerome Powell, but later steadied as some saw little immediate risk of Trump gaining control over the Fed’s rate-setting committee. Financial stocks dropped after Trump late last week called for a 10% cap on credit-card interest rates for one year, with Capital One, Synchrony and American Express among the hardest hit. The S&P 500 hovered near 6,970 after an early slide, while gold rose nearly 3% to a record high of USD4,618 an ounce and the dollar weakened. Nvidia was 1% higher in afternoon trading as it said it would invest USD1 billion over five years with Eli Lilly in a new Silicon Valley lab to accelerate AI use in drug discovery. Exxon shares were 0.7% lower after Trump said he may block Exxon Mobil from investing in Venezuela after CEO Darren Woods called the country “uninvestable” during a Friday meeting with the president. Investors also turned their attention to upcoming inflation data and the start of bank earnings season. S&P 500 earnings are expected to grow 8.4% in the fourth quarter and 14.6% in 2026, according to Bloomberg. (Bloomberg)(WSJ)(Reuters)

3.

Defection odds: After fresh polling put One Nation level with the Coalition, its leader Pauline Hanson told Capital Brief the Liberal Party has been taken over by moderates and criticised two of its would-be leaders. Hanson said further Coalition defections were a “strong possibility”, but warned she would not accept anyone “jumping on the coattails because they see a rise in the polls”. Opposition Leader Sussan Ley was dealt a fresh blow last week, after DemosAU polling conducted for Capital Brief showed the Coalition’s primary vote had fallen to 23%, with One Nation rising to match it. It is the first time a minor party has been level with a traditional party of government in Australia. While Hanson said there was a strong possibility of further Coalition defections, she said she was not in active discussions with any MPs and warned that joining One Nation was no foregone conclusion. (Capital Brief)

4.

Proxy fight: Paramount Skydance plans to launch a proxy fight for board seats at Warner Bros Discovery and has filed a lawsuit to compel Warner to release more information about its merger agreement with Netflix. In a letter to Warner Bros shareholders, Paramount CEO David Ellison accused Warner of finding “increasingly novel reasons for avoiding a transaction with Paramount, but what it has never said, because it cannot, is that the Netflix transaction is financially superior to our actual offer.” The Delaware lawsuit aims to force Warner Bros to release information about how it values the Netflix deal and how it is valuing the cable TV assets it plans to spin off prior to a Netflix sale. Paramount also said it plans to nominate a slate of directors ahead of Warner Bros’ annual meeting when the advance notice window opens in three weeks. Should Warner Bros call a special meeting ahead of its scheduled annual meeting, Paramount will “solicit proxies against such approval” to ensure shareholders “get the final decision.” (Capital Brief)(Paramount Skydance)

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Siri’s Gemini: Apple entered a multiyear deal with Google to use its Gemini models for a redesigned Siri and other upcoming Apple Intelligence features, the companies said in a joint statement. The agreement deepens the companies' AI collaboration and follows Apple’s decision that Google’s technology offers “the most capable foundation” for its foundation models. Apple said the services will continue to run on devices or via “private cloud compute” to maintain privacy standards. Terms of the deal were not disclosed, but Bloomberg previously reported Apple planned to pay about USD1 billion ($1.5 billion) annually. The tie-up raises questions about Apple’s existing use of ChatGPT, which handles more complex Siri and Apple Intelligence queries. The company has not clarified how the Google deal will affect that integration. The announcement sent Alphabet’s valuation above USD4 trillion on Monday, with shares rising as much as 1.6% before paring back some of those gains by the afternoon. Apple’s stock also rose. (joint statement)(Bloomberg)(Reuters)

6.

Positive pivot: Venture capital investors in heavily hyped healthcare play Eucalyptus have endorsed its move to retreat from an expansion into men's longevity and instead focus on its booming weight loss business as it finalises a funding round expected to value it at more than $1 billion. As Capital Brief revealed last week, Eucalyptus executive Dan Cable recently left the business as Compound, the longevity product he led, was delayed in the UK after already being paused in Australia. Airtree general partner Jackie Vullinghs said the VC supported the move as Eucalyptus was growing “incredibly fast” and at scale through its GLP-1 offerings — a class of drugs used commonly for weight loss. “They saw GLP-1s early, and they’re now benefitting from having built infrastructure ahead of the curve and they’re really well positioned to take advantage of it,” she told Capital Brief. (Capital Brief)

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Sovereign strategy: Meta appointed former Trump adviser and ex‑Goldman Sachs executive Dina Powell McCormick as president and vice chairman as it accelerates investment in AI infrastructure and data centres. Powell McCormick, who served as deputy national security adviser during Trump’s first term and spent 16 years at Goldman Sachs, will focus on capital strategy and partnering with governments and sovereigns, Meta said in a statement. Powell McCormick resigned from Meta’s board in December and will report directly to CEO Mark Zuckerberg. The appointment is part of a new senior leadership group overseeing Meta’s expanding data centre buildout. Zuckerberg said Meta plans to build “tens of gigawatts this decade” as it pursues superintelligence. According to Reuters, in 2025 Meta committed up to USD72 billion in capital spending. It is still seeking tens of billions in external financing. Trump congratulated Powell McCormick on Truth Social, calling her “fantastic, and very talented.” (Reuters)(Meta)

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Deepfake probe: The UK’s independent online safety watchdog, Ofcom, opened a formal investigation into social media platform X over reports of the Grok AI chatbot being used to create and share sexual deepfake imagery. Ofcom said that it received “deeply concerning” reports of the Grok AI chatbot account on X being used to create and share undressed images of people – which may amount to intimate image abuse or pornography – and sexualised images of children that may amount to child sexual abuse material. If the probe finds that X has broken the law, it has the power to require platforms to take specific steps to come into compliance or to remedy harm and can also impose fines of up to £18 million ($36.13 million) or 10% of qualifying worldwide revenue. Australia’s online safety regulator confirmed last week that it was investigating complaints about sexualised deepfake images generated on X. (Ofcom)(Capital Brief)