Stocks and Treasuries fell on Trump’s tariff plans
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SINGAPORE (Reuters) – Global stocks and U.S. Treasuries were volatile on Tuesday, after Donald Trump announced trade tariffs on neighboring countries in a brief relief meeting at the start of the new presidency in the first few hours of the session.
US markets were closed for a holiday on Monday, so the first reactions to Trump’s inauguration were felt during Asian trading on Tuesday.
Trump said his administration was considering imposing 25% tariffs on Mexico and Canada as early as 2018.
Trump’s plans for high tariffs and tax cuts are the main focus of financial markets, as these policies will fuel inflation and reignite the US economy, boosting the dollar and hurting bonds.
U.S. stock futures reacted quickly to the new developments, reversing gains made earlier in the session, with Nasdaq futures slipping 0.4% and S&P 500 futures down 0.25%.
EUROSTOXX 50 futures and FTSE futures each lost 0.3%, while Japan’s Nikkei similarly reversed early gains to end 0.4% lower.
Khun Goh, head of Asia research at ANZ, said: “We are very confident that at some point Trump will start moving on tariff measures… It is clear what his intentions are.”
“Just because I didn’t raise this issue on day one doesn’t mean it’s off the agenda. It’s certainly firmly on the agenda. We’ll have to wait and see what shape or form it takes.”
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.2 percent.
In the Treasury market, the benchmark 10-year US Treasury yield was four points lower at 4.5682 percent, despite paring some early losses. Yields move inversely to bond prices.
The two-year Treasury yield last stood at 4.2424%.
After Trump stopped short of imposing new tariffs in the first few hours of his presidency, overall market activity was largely unchanged from the previous session, which sent the dollar sliding broadly.
The greenback offset those losses, with the euro trading 0.36% lower at $1.0378, while sterling fell 0.4% to $1.2282.
Against the Mexican peso, the dollar rose more than 1 percent to 20.69. It rose 0.8% to C$1.4423 against the Canadian dollar.
“Investors now face a new reality where sudden policy changes and volatility are the norm,” said Boris Kovacevich, global macro strategist at Convera.