CDN NEWS | 
US NEWS 
- Presidential memo stops short of calling for new tariffs
- Trump’s call for national emergency at Mexico border hits peso
By Cecile Gutscher and Isabelle Lee
Relief that Donald Trump will hold off from imposing China-specific tariffs on his first day in office propelled US equity futures higher on Monday. The dollar slumped.
Trump was sworn in as president, and promised to sign a series of executive orders the same day. For now, those will not include new tariffs on the three biggest US trading partners.
Contracts on the S&P 500 rose 0.4% with Wall Street closed Monday for a holiday. A gauge of the dollar dropped as much as 1.1%, extending a retreat from the 13-month high it reached earlier in January. The Mexican peso pared earlier gains after Trump said he would declare a national emergency at the southern border.
The incoming administration has pivoted away from a full-blown trade war, toward potential engagement with Beijing, according to people familiar with the plans. Trump plans to issue a broad memorandum that directs federal agencies to study existing trade policies and relationships with China, Canada and Mexico, the Wall Street Journal reported earlier Monday.
That suggests he plans to pursue a more deliberative approach to trade relations, as he moves to quickly implement his policy agenda through a raft of decrees.
“I do think, and maybe it’s just a hope, that Trump backs off from his most extreme rhetoric, especially on the deportation and tariff fronts,” said Marvin Loh, senior macro strategist at State Street Global Markets.
Monday’s whipsaw moves in equity futures and currencies, on a day when much of US trading was closed, nevertheless provided a foretaste of the uncertainty and volatility to come, according to Michael Green, chief strategist at Simplify Asset Management.
“The challenge becomes are you protecting against the risk of tariffs, or the risk that expected tariffs are not going to be put on?” Green said in an interview with Bloomberg TV. “It becomes a really challenging environment, one that likely translates to higher implied volatility.”
Source: Bloomberg
Trump’s inflationary domestic agenda, from tax cuts to fiscal spending, may keep the dollar strong and Treasury yields elevated. For one, Nomura Holdings Inc. has joined T. Rowe Price in seeing a chance of 10-year Treasury yields rising to 6% this year, while a small group of bond traders believe the Federal Reserve’s next move on interest rates will be to increase them, contrary to the majority view that rates will be cut.
“Any further stimulus that sparks a growth and inflation shock could lead to a Fed rate hiking cycle, for which markets are largely unprepared,” Iain Stealey, international CIO for fixed income at J.P. Morgan Asset Management, wrote in a note to clients.
Trump’s plan to invoke emergency powers in order to boost domestic energy production, while shifting away from renewable sources, sparked declines in Siemens Energy AG, Enel SpA and Vestas Wind Systems A/S. Crude oil fell.
Cryptocurrency traders, meanwhile, reaped early rewards as Bitcoin touched another record after Trump and his wife Melania unveiled their own memecoins over the weekend. The digital currency traded flat after erasing earlier gains.
This story was produced with the assistance of Bloomberg Automation.
Share This:
