President Donald Trump’s bold pronouncements regarding steel and aluminum import tariffs have sent ripples of both apprehension and opportunity through global markets, fueling a surge in the dollar and propelling gold to unprecedented heights.
As investors grappled with the potential ramifications of these trade maneuvers, US stock futures hinted at a resilient rebound following Friday’s market slump, suggesting a complex interplay of caution and optimism.
Currency and commodity markets react sharply to trade jitters
The Bloomberg Dollar Spot Index, a key measure of the dollar’s strength, ascended to a near-week high, with the yen and the Canadian dollar bearing the brunt of the greenback’s advance.
Simultaneously, gold, a traditional safe-haven asset, mirrored the dollar’s upward trajectory, its allure amplified by Trump’s trade rhetoric.
“Our view in tariffs remain that they will cause volatility, are a negotiating tool and will eventually be not as bad as feared,” said Mohit Kumar at Jefferies International.
US stocks show signs of rebound amidst tariff turbulence
S&P 500 and Nasdaq 100 futures contracts both experienced gains of at least 0.5%, indicating a potential return of buyers following last week’s S&P 500 selloff.
The tariff news acted as a shot in the arm for American metals stocks, with United States Steel Corp. experiencing a premarket surge of as much as 15%, and Alcoa Corp. rallying by 5%.
Adding to the positive momentum, McDonald’s Corp. reported robust fourth-quarter sales figures.
European markets see activity amidst energy and investment news
Across the Atlantic, BP Plc shares witnessed their most significant surge since 2020, fueled by reports that activist investor Elliott Investment Management had acquired a substantial stake in the oil giant, reported by Bloomberg News.
Trump’s intention to impose a 25% levy on steel and aluminum imports compounded existing market anxieties ahead of Federal Reserve Chair Jerome Powell’s semi-annual congressional testimony and the US President’s anticipated unveiling of reciprocal tariffs on “everyone” this week.
While Trump stated that the metals tariffs would apply universally, he remained vague regarding the implementation timeline.
Powell’s testimony and inflation data loom large on the horizon
The gains in US stock futures suggest some buyers may want to get back into the market following the 1% selloff retreat in the S&P 500 at the end of last week.
There are a number of key events on the radar in coming days, including Powell’s speech and US CPI data.
Separately, Trump said Elon Musk’s government efficiency team has found irregularities while examining data at the US Treasury Department. Benchmark 10-year Treasuries were steady.
Powell is poised to deliver his semi-annual testimony at a critical juncture, as policymakers signal a measured approach to further easing monetary policy.
Recent nonfarm payroll figures revealed a moderation in job growth, and revisions indicated softer, though still solid, gains in 2024.
Inflation data slated for release this week may further solidify these arguments, potentially reinforcing market expectations for just one Fed rate cut this year.
Global commodities respond to shifting market dynamics
In the commodities arena, European natural gas prices soared to a two-year peak, driven by colder temperatures and the accelerated depletion of the region’s storage facilities.
Benchmark futures climbed as much as 4.1% to levels unseen since February 2023.
Aluminum futures in London remained steady as traders awaited clarity on the specifics of the impending tariffs.
Copper prices exhibited little change.
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