Markets in Flux as Trump’s Presidency Takes Shape
As the world adjusts to a new era of American leadership, financial markets are grappling with the implications of Donald Trump’s presidency. The first day of his term saw a tumultuous ride for stocks and currencies, as investors struggled to decipher the president’s trade tariff plans.
Tariff Uncertainty Weighs on Markets
Despite a flurry of executive orders and directives, Trump’s inauguration day lacked concrete details on long-promised trade tariffs. This uncertainty sparked a rollercoaster ride for markets, with the US dollar weakening sharply and overseas stocks surging. However, Trump’s later comments on potential 25% tariffs on Mexico and Canada sent currencies and stocks tumbling once more.
Global Markets React
The Mexican peso and Canadian dollar gave back their earlier gains, while the euro’s rally was halved. China’s offshore yuan also retreated, surrendering almost half of its previous day’s advance. European stocks stalled, and mainland Chinese stocks erased early gains of nearly 1%. Hong Kong’s Hang Seng index bucked the trend, closing 0.9% higher.
US Stocks Look Ahead to Earnings Season
As Wall Street returns from the Martin Luther King holiday, the overall picture remains positive, with index futures up to 0.5% before Tuesday’s bell. Netflix is set to top the corporate diary later, amidst a busy fourth-quarter earnings season.
Bond Market Reacts to Trump’s Anti-Inflation Measures
Encouraged by Trump’s vague prioritization of anti-inflation measures, 10-year US Treasury yields extended last week’s retreat to hit their lowest since January 2. The 2-to-10-year yield curve gap narrowed to its flattest for the year, as 2-year yields backed up to 4.25%.
Oil Prices Retreat, Green Stocks Take a Hit
Trump’s push for more oil drilling and US self-sufficiency in oil and gas sent US crude oil prices to their lowest in 10 days, improving the mood in bonds. However, his withdrawal from climate talks and planned rollback of alternative energy initiatives saw global green stocks tumble, with wind power stocks in Europe taking a significant hit.
Crypto Markets Disappointed, UK Employment Report Mixed
The absence of any specific reference to the digital token industry on inauguration day was seen as a disappointment for crypto markets, which recoiled from new records set earlier in the week. Meanwhile, the British employment report presented a mixed picture, with UK pay growth staying strong but signs of a softening jobs market emerging.
Key Developments to Watch
Later on Tuesday, markets will be watching key developments, including Canada’s December consumer price inflation, US corporate earnings from Netflix and others, and the World Economic Forum in Davos. The ECOFIN meeting of European Union finance ministers in Brussels will also be closely monitored.
Leave a Reply