New York, Jan 12 (AP) Stocks are falling on Wall Street after Federal Reserve Chair Jerome Powell said the Department of Justice had served the central bank with subpoenas and threatened it with a criminal indictment over his testimony about the Fed's building renovations.

The S&P 500 fell 0.3 per cent in early trading Monday. The Dow Jones Industrial Average lost 384 points, or 0.8 per cent, and the Nasdaq composite fell 0.2 per cent. Powell characterised the threat of criminal charges as pretexts to undermine the Fed's independence in setting interest rates, its main tool for fighting inflation. The threat is the latest escalation in President Donald Trump's feud with the Fed.

US futures sank Monday after Federal Reserve Chair Jerome Powell said the Department of Justice had served the central bank with subpoenas and threatened it with a criminal indictment over his testimony about the Fed's building renovations.

Futures for the S&P 500 declined 0.5 per cent before the opening bell, while futures for the Dow Jones Industrial Average fell 0.7 per cent. Nasdaq futures slid 0.8 per cent.

The threat of a criminal indictment over Powell's testimony about the Fed's building renovations is the latest escalation in President Donald Trump's feud with the Fed. Trump has criticised the USD 2.5 billion renovation of two office buildings as excessive.

Trump has repeatedly attacked Powell and the Fed for not cutting its key interest rate as sharply as he prefers. The renewed fight is expected to rattle financial markets Monday and could over time escalate borrowing costs for mortgages and other loans.

Powell issued a video statement in which he bluntly characterized the threat of criminal charges as simple “pretexts” to undermine the Fed's independence when it comes to setting interest rates.

In a brief interview with NBC News Sunday, Trump insisted he didn't know about the investigation into Powell. When asked if the investigation is intended to pressure Powell on rates, Trump said, “No. I wouldn't even think of doing it that way.” Powell's term as chair ends in May, and Trump administration officials have signaled that he could name a potential replacement this month. Trump has also sought to fire Fed governor Lisa Cook.

The renewed attacks on the Fed's independence, and Powell's full-throated defense, reignite what had appeared to be a dormant battle between Trump and the chair he appointed in 2017. The subpoenas will renew fears that the Fed's independence from day-to-day politics will be compromised, which could undermine global investors' confidence in US Treasury securities.

Treasurys were modestly weaker early Monday following Powell's video statement, with yields for the 2-year and 10-year both ticking up a couple of basis points.

Bank and credit card stocks tumbled in premarket after Trump said in a social media post that he wanted a one-year, 10 per cent cap on credit card interest rates.

The hardest hit were Capital One Financial and Synchrony, which each fell more than 8 per cent in premarket. Visa and Mastercard each retreated around 2 per cent.

Shares of Wells Fargo and Bank of America were off close to 2 per cent, while JPMorgan lost 2.8 per cent and Citigroup slid 4 per cent. Those big US banks also report their latest financial results this week.

Trump was not clear whether a cap might take effect through executive action or legislation, but that he hoped the rule would be in place January 20, one year after he took office.

Strong opposition is expected from Wall Street and the credit card companies, which donated heavily to Trump's 2024 campaign.

Shares of ExxonMobil inched down after Trump said Sunday that he is “inclined” to keep the US oil giant out of Venezuela after its top executive was skeptical about oil investment efforts in the country after the toppling of former President Nicolás Maduro.

Trump told reporters on Air Force One on Sunday that he didn't like ExxonMobil's response. “They're playing too cute,” Trump said.

Shares of Chevron and ConocoPhillips were both up modestly in early trading Monday.

Investors will also be analyzing a several important economic reports this week, including an update on US inflation at the consumer level on Tuesday, followed by a report on wholesale prices on Wednesday. New data on retail sales and the housing market also come this week.

Elsewhere, in Europe at midday the CAC 40 in Paris shed 0.1 per cent and Britain's FTSE 100 edged 0.1 per cent higher. Germany's DAX was up 0.5 per cent.

In Asian trading, Hong Kong's Hang Seng gained 1.4 per cent to 26,608.48, while the Shanghai Composite index jumped 1.1 per cent to 4,165.29 after reports that Chinese leaders were preparing more help for the economy.

Tokyo's markets were closed for a holiday.

In South Korea, the Kospi added 0.8 per cent to 4,624.79, while Australia's S&P/ASX 200 gained 0.5 per cent to 8,759.40.

Taiwan's Taiex gained 0.9 per cent.

US benchmark crude oil gave up early gains, falling 20 cents to USD 58.91 per barrel. Brent crude, the international standard, shed 17 cents to USD 63.17 per barrel.

The price of gold rose 2.2 per cent and the price of silver jumped 6 per cent. Copper was up 1.4 per cent. (AP) RD RD