Market Turmoil: Trump’s Presidency Sparks Volatility
As the world adjusts to Donald Trump’s new presidency, global markets are experiencing a rollercoaster ride. On Tuesday, shares and U.S. Treasuries seesawed, erasing early gains as investors digested Trump’s plans for trade tariffs on neighboring countries.
Tariff Threats Send Markets into a Spin
Trump’s administration is considering imposing 25% tariffs on Mexico and Canada as early as February 1, dashing hopes of a delay. This move has significant implications for financial markets, which are bracing for inflation and a potential boost to the dollar.
Stock Futures Take a Hit
U.S. stock futures swiftly reacted to the news, reversing their earlier gains. Nasdaq futures slid 0.4%, while S&P 500 futures fell 0.25%. European markets followed suit, with EUROSTOXX 50 futures and FTSE futures losing 0.3% each. Japan’s Nikkei also reversed its early gains, trading 0.4% lower.
Expert Insights: Tariffs Are Just the Beginning
According to Khoon Goh, head of Asia research at ANZ, “At some point, we are quite certain that Trump will start to move on the tariff measures… It’s quite clear what his intent is.” Goh believes that Trump’s delay in addressing tariffs on day one does not mean they are off the agenda.
Treasury Market Seesaw
In the Treasury market, the benchmark 10-year U.S. Treasury yield pared some early losses but remained four basis points lower at 4.5682%. Yields move inversely to bond prices. The two-year Treasury yield last stood at 4.2424%.
Currency Markets React
The dollar recouped its earlier losses, leaving the euro trading 0.36% lower at $1.0378, while sterling tumbled 0.4% to $1.2282. Against the Mexican peso, the dollar surged more than 1% to 20.69, and rose 0.8% against the Canadian dollar to C$1.4423.
A New Era of Volatility
Boris Kovacevic, global macro strategist at Convera, notes that “investors now face a new reality where sudden policy shifts and increased volatility are the norm.” Trump’s push for trade protectionism and economic nationalism has created uncertainty, leaving investors wondering how aggressively he will pursue this agenda.
Commodity Prices Weaken
Oil prices weakened after Trump announced plans to maximize U.S. oil and gas production by declaring a national emergency. Brent crude futures ticked up 0.06% to $80.19 a barrel, while U.S. West Texas Intermediate crude futures sank 1.46% to $76.74 per barrel. Spot gold gained 0.14% to $2,712.20 an ounce.
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