Stocks Fall, Dollar Strengthens on Trump Tariffs: Markets Wrap

(Bloomberg) — Asian equities and US stock index futures fell while gold touched a fresh high in a sign of investor caution after President Donald Trump outlined tariffs on US imports of steel and aluminum. 

A gauge of Asian equities dropped, weighed down by selling pressure for shares in Hong Kong and mainland China. Contracts for the S&P 500 and Nasdaq 100 both declined as did those for the region-wide Euro Stoxx 50. Japanese markets were closed Tuesday.

Gold, a popular haven in times of uncertainty, rallied for a third session and briefly rose above $2,940 to set a new high. An index of the dollar held gains from Monday.

The moves are the latest sign investors are struggling to distinguish threat from action within Trump’s tariffs, while also gauging the potential flow-on effects for global trade, corporate earnings and inflation. While tariffs on China have gone into effect, uncertainty over more levies have sparked fresh concerns retaliatory measures will intensify a global trade war.

“The best approach in terms of asset allocation is to find assets that can protect you,” said Christian Mueller-Glissmann, head of asset allocation research for Goldman Sachs, speaking on Bloomberg Television. “The big challenge is that this is going to be much more difficult from here because the tariffs are very specific.”

Trump set tariffs on steel and aluminum shipments from all countries, including major suppliers Mexico and Canada, from March 12, but said he would consider an exemption for Australia. The president earlier said he would announce reciprocal tariffs this week on countries that tax US imports.

Aside from the global trade picture, investors will also be focused on this week’s key inflation data and Fed Chair Jerome Powell’s testimony before Congress. Expected inflation rates over the next year and three years ahead were both unchanged in January at 3%, according to results of the New York Fed’s Survey of Consumer Expectations published Monday.

“Inflation data, Powell’s congressional testimony, and tariffs are poised to drive the market story,” said Chris Larkin at E*Trade from Morgan Stanley. “If the S&P 500 is going to break out of its two-month consolidation, it may need a respite from the types of negative surprises — like DeepSeek, tariffs, and consumer sentiment — that have tripped it up over the past few weeks.”

 

Elsewhere, the Indian rupee strengthened as much as 1% against the US dollar. The yen was little changed, while the British pound weakened. A report from the Financial Times stated Catherine Mann, a voting member at the Bank of England who helps set interest rates, said weak demand is beginning to outweigh inflation risk.

The whipsawing trade in Chinese equities follows a rally this year helped along by fresh demand for technology stocks that has lifted a gauge of Hong Kong tech companies around 17% this year.

“We have rallied a lot,” Jason Lui, head of APAC equity and derivative strategy, BNP Paribas SA, said on Bloomberg Television regarding Chinese stocks. The uplift from DeepSeek, a Chinese generative AI alternative, comes just weeks before next month’s National People’s Congress in China, where policy initiatives are typically disclosed, he said.

“DeepSeek bought us some time. It allows investors to rethink Chinese tech valuations and it also gives time for Chinese policymakers to rethink some of the potential measures as well.”

Treasuries weren’t trading during Asian hours due to a holiday in Japan. Oil advanced from near its lowest levels this year as shrinking Russian production eased concerns over a glut. 

The resilience of stocks in the face of tariffs may invite further trade escalations, making equity pullbacks likely, according to Deutsche Bank AG strategists including Binky Chadha.

They noted these pullbacks require the same playbook as for geopolitical shocks, which have historically seen sharp but short-lived selloffs, with equities typically bottoming even as the event continues and recouping losses before any de-escalation. 

In such scenarios, equities would typically weaken 6%-8%, moving lower for three weeks before gaining strength for three weeks.

“The tariffs are not something that we will completely dismiss or ignore,” said Hartmut Issel, head of APAC equities and credit for UBS Wealth Management, speaking on Bloomberg Television. A mixed allocation of US stocks, high-grade bonds and gold “should give us a proxy against all of these tariff risks,” he said.

Key events this week:

• Fed Chair Jerome Powell gives semiannual testimony to Senate Banking Committee, Tuesday
• Fed’s Beth Hammack, John Williams, Michelle Bowman speak, Tuesday
• US CPI, Wednesday
• Fed Chair Jerome Powell testifies to House Financial Services panel, Wednesday
• Fed’s Raphael Bostic and Christopher Waller speak, Wednesday
• Eurozone industrial production, Thursday
• US initial jobless claims, PPI, Thursday
• Eurozone GDP, Friday
• US retail sales, industrial production, business inventories, Friday
• Fed’s Lorie Logan speaks, Friday

 

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.3% as of 3:19 p.m. Tokyo time
• Hong Kong’s Hang Seng fell 0.4%
• The Shanghai Composite fell 0.2%
• Euro Stoxx 50 futures were little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0306
• The Japanese yen was little changed at 151.92 per dollar
• The offshore yuan was little changed at 7.3092 per dollar

Cryptocurrencies

• Bitcoin rose 0.8% to $98,214.01
• Ether rose 1.6% to $2,706.47

Bonds

• Australia’s 10-year yield declined one basis point to 4.39%

Commodities

• West Texas Intermediate crude rose 0.5% to $72.65 a barrel
• Spot gold rose 0.6% to $2,924.31 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Rob Verdonck.

(An earlier version corrected sixth paragraph to reflect March 12 implementation date stated in White House orders. A White House official had previously said they would take effect March 4.)

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