Stocks, Commodity Currencies Drop on Tariff Fears: Markets Wrap

(Bloomberg) — President Donald Trump’s pledge to impose tariffs on all imports of steel and aluminum sent the dollar higher as investors braced for increased global trade tensions. Hong Kong stocks rallied.

Equities presented a mixed picture with a benchmark of Asian shares dropping the most in a week while the S&P 500 futures and contracts for Euro Stoxx 50 edged higher. A gauge of the dollar climbed 0.2%, underscoring investors’ concerns about the inflationary effect of tariffs and how that might influence the Federal Reserve’s policy easing cycle. 

Trump’s intention to announce a 25% levy on steel and aluminum Monday added to already tense sentiment before Fed Chair Jerome Powell’s semiannual congressional testimony and the US President’s possible unveiling of reciprocal tariffs on “everyone” this week. Trump said the metals tariffs would apply to imports from all countries, though he didn’t specify when they would take effect.

“Markets continue to react to Trump policy shifts rather than economic data,” Bob Savage, head of markets strategy and insights at BNY, wrote in a note to clients. “The take from Fed Chair Powell will be critical in judging the costs of tariffs and other policy shifts on easing plans.” 

The dollar was stronger against a majority of its Group-of-10 peers including the Japanese yen and the Canadian dollar following Trump’s comments. 

“The risk remains that tariffs incrementally escalate over time,” said Billy Leung, investment strategist at Global X ETFs. “That could fuel persistent inflation pressures, keep the Federal Reserve cautious on rate cuts, and reinforce policy divergence factors that support a stronger dollar.”

Separately, Trump said Elon Musk’s government efficiency team has found irregularities while examining data at the US Treasury Department.

Powell will deliver his semi-annual testimony at a time when officials are signaling they’re not in a hurry to further ease policy. Nonfarm payrolls moderated last month and revisions show US job gains were softer but still solid in 2024. Inflation data due this week may help buttress those arguments and underpin market pricing for just one Fed rate cut this year.

In Singapore, shares in DBS Group Holdings Ltd. rose to a record after Southeast Asia’s biggest lender unveiled a dividend plan.

Chinese equities in Hong Kong bucked the trend and advanced. The Hang Seng Tech Index hit its highest since October on an intraday basis, as the growing artificial intelligence clout of the world’s second-largest economy sparked a wave of optimism. 

China Telecom Corp. stock climbed by the 10% limit in Shanghai to a record as analysts said it stands to benefit from rising capex related to the integration of DeepSeek’s new AI model.  

Shares of Chinese e-commerce platform operators climbed as Trump delayed suspension of the de minimis exception, temporarily retaining duty free status for low-value packages coming from the Asian country.  

“We have a relatively positive view of risk assets,” though positions have been trimmed due to financial market volatility, Jin Yuejue, a multi-asset solutions investment specialist at JPMorgan Asset Management, told Bloomberg Television. “There are still interesting stories in the China market,” as some companies excel at technological innovation. 

Commodities were muted as traders waited for more details on when and how Trump’s latest tariffs would operate. Aluminum futures in London — the global benchmark — were slightly weaker at $2,619.50 a ton, while copper was little changed. Gold edged up toward a record as investors shunned risk. 

Elsewhere, South Africa’s rand fell after the US froze all aid to the nation over what Trump falsely claimed were rights violations stemming from a new land-expropriation law, as well as its allegations of genocide against Israel. South Africa’s foreign ministry in a statement Saturday expressed “great concern that the foundational premise of this order lacks factual accuracy.” 

Some key events this week: 

• China’s retaliatory tariffs on US goods are scheduled to take effect, Monday
• ECB President Christine Lagarde testifies to European Parliament, Monday
• Norway GDP, Tuesday
• BOE Governor Andrew Bailey speaks, Tuesday
• Fed Chairman Jerome Powell gives semiannual monetary policy testimony to Senate Banking Committee, Tuesday
• Brazil CPI, Tuesday
• India CPI, industrial production, Wednesday
• US CPI, Wednesday
• Fed Chair Jerome Powell testifies to House Financial Services panel, Wednesday
• UK industrial production, GDP, Thursday
• Germany CPI, Thursday
• Eurozone industrial production, Thursday
• Norges Bank Governor Ida Wolden Bache gives annual address, Thursday
• Eurozone GDP, Friday

Some of the main moves in markets: 

Stocks

• S&P 500 futures rose 0.3% as of 2:19 p.m. Tokyo time
• Japan’s Topix was little changed
• Australia’s S&P/ASX 200 fell 0.3%
• Hong Kong’s Hang Seng rose 1.6%
• The Shanghai Composite rose 0.4%
• Euro Stoxx 50 futures rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%
• The euro was little changed at $1.0318
• The Japanese yen fell 0.4% to 151.98 per dollar
• The offshore yuan fell 0.1% to 7.3127 per dollar

Cryptocurrencies

• Bitcoin rose 1.9% to $97,011.89
• Ether rose 3.2% to $2,634.01

Bonds

• The yield on 10-year Treasuries was little changed at 4.49%
• Australia’s 10-year yield advanced four basis points to 4.40%

Commodities

• West Texas Intermediate crude rose 0.7% to $71.53 a barrel
• Spot gold rose 0.6% to $2,878.96 an ounce

This story was produced with the assistance of Bloomberg Automation.

 

–With assistance from Matthew Burgess, Jake Lloyd-Smith and Ruth Carson.

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