MARKET WRAPS
Watch For:
Germany ZEW indicator of economic sentiment; UK unemployment; trading update from Alstom
Opening Call:
European stock futures edged lower as markets reacted to Trump's executive orders and tariff plans. Asian stock benchmarks advanced in choppy trade; Treasury yields edged lower; while oil and gold futures fell.
Equities:
Stock futures were lower early Tuesday as markets digested President Donal Trump's flurry of executive orders and comments on plans to place 25% tariffs on imports from Canada and Mexico next month.
Though his comments on Mexico and Canada tariffs suggest Trump may be aggressive with trade measures, he also said he isn't ready to move ahead with universal tariffs on goods from around the world.
"We're not ready for that yet," Trump told reporters when asked about the idea of universal tariffs. He had campaigned on the use of universal tariffs of at least 10% on imports from a variety of countries.
Trump's series of executive orders didn't include immediate changes to U.S. trade policy and held off on unveiling "day-one" tariffs, suggesting a shift to bilateral negotiations, CIMB said.
Forex:
The dollar strengthened early Tuesday against G-10 and Asian currencies except for the yen. USD/CAD and USD/MXN shot up after Trump said he is aiming to place 25% tariffs on imports from Canada and Mexico on Feb. 1. Trump also hinted that there still could be tariffs coming on China and elsewhere.
The dollar had slid following Trump's inauguration amid hopes that he would hold off on implementing tariffs immediately.
Bonds:
The absence of immediate tariffs in Trump's speech should drive relief across U.S. Treasurys but the dynamic may not last as he again threatened Canada and Mexico with 25% tariffs later, DBS's Eugene Leow said.
Stricter immigration could lead to an even tighter labor market and structurally stickier wage inflation, Leow said. Room for downside moves in U.S. yields will be limited as long as the economy holds up, Leow said.
Energy:
Oil's trajectory will be shaped in part by U.S. policy's impact on global supply, said Philip Nova analyst Priyanka Sachdeva. The market is convinced Trump will favor imposing more sanctions on Russian, Iranian and Venezuelan oil, she said.
Trump's domestic policies are expected to increase U.S. oil production beyond the record levels of 13 million barrels per day this year, she added. However, higher production won't immediately bump up supply significantly as the market is already tight. For now, the only certainty is volatility, she said.
Metals:
A drop in the greenback lends some support to base-metals prices, said Sucden Financial's Daria Efanova. Base metals such as copper are dollar denominated, and so tend to rise when the U.S. currency falls.
Among metals, aluminum remains particularly sensitive to supply issues, Efanova said. Potential sanctions on Russian suppliers have pushed up prices for that metal. "At current levels, we believe that aluminum is exhausting its upside potential and expect a moderate decline as it mean reverts in the coming days," she said.
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Iron ore gained in Asia. Prices had fallen recently as supply side issues eased with iron ore shipments resuming from Australian bulk-export terminal Port Hedland, after a severe tropical cyclone moved away, ANZ said. The steelmaking raw material has had a positive start so far this year, but gains may be limited on concerns that Australia is producing too much steel, the bank said.
TODAY'S TOP HEADLINES
Trump's Plans for Canada, Mexico Tariffs Sends Dollar Higher
The U.S. dollar surged against neighboring currencies after President Trump said he plans to place 25% tariffs on imports from Canada and Mexico on Feb. 1, stoking broad volatility in asset classes as investors adjust to the new administration's policy priorities.
The U.S. dollar climbed 0.9% against the Canadian dollar and 1.1% versus the Mexican peso after Trump's comments. The greenback also strengthened against most Asian currencies as Trump hinted that there could be tariffs coming on China and elsewhere. He also threatened an at least 100% tariff on BRICS nations, which includes China, Russia, India, Indonesia and Iran.
Trump Signs Executive Orders Focused on the Border and Energy
WASHINGTON-President Trump signed executive orders to overhaul border and energy policies and end diversity programs across the federal government, unwinding signature Biden administration policies on the first day of his second term.
Trump's immigration plans include ending birthright citizenship, declaring a national emergency at the southern border and ending asylum by speeding deportations, Trump said. He gave the defense secretary 10 days to provide a plan for U.S. troops to help seal the border.
BHP's Copper, Iron Ore Output Rose in Second Quarter
BHP Group on Tuesday posted a sharp rise in second-quarter copper production thanks to a jump in output at Escondida, the world's largest copper mine.
The Australia-based mining giant has put copper at the center of its growth ambitions, striking deals to grow its footprint and planning new projects. It reckons copper, the world's favorite electricity conductor, will be essential to the global energy transition, helping to power electric cars and renewable energy.
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Expected Major Events for Tuesday
07:00/UK: Dec UK monthly unemployment figures
07:00/EU: Dec New Passenger Car Registrations in Europe statistics (EU27 + EFTA3)
09:00/ICE: Dec Harmonized CPI
09:30/UK: Dec Monthly Insolvency statistics
10:05/GER: Jan ZEW Indicator of Economic Sentiment
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This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
01-21-25 0023ET
