President Donald Trump’s recent announcement about imposing tariffs on all steel and aluminum imports has led to a decline in commodity currencies. This move has also raised concerns about rising trade tensions, which caused equities to face a risk-off day. The Australian and Canadian dollars, as well as the Norwegian krone, all saw drops following Trump’s statements.
The commodity-driven currencies were particularly affected, while Asian equity markets faced a significant dip, marking the largest decline in a week. Despite this, shares in China and Hong Kong saw positive movement. Iron ore prices rose, and gold neared its record high.
Trade Tensions Deepen as Tariffs Loom
Trump’s comments about a 25% tariff on steel and aluminum, set to be announced Monday, added to the already tense market sentiment. Investors remain cautious, especially ahead of Federal Reserve Chair Jerome Powell’s upcoming testimony before Congress, as well as the possibility of additional tariffs being introduced by Trump this week. Trump has indicated that these tariffs will apply to imports from all countries, though the exact timing remains unclear.
“Markets are continuing to react to Trump’s policy changes rather than economic data,” said Bob Savage, head of market strategy at BNY. “Fed Chair Powell’s testimony will be critical in assessing the potential impacts of tariffs on monetary easing plans.”
Market Movements: US and Asia
In early Asian trading, futures for both the S&P 500 and Nasdaq showed slight gains. However, US Treasury yields decreased as markets responded to the ongoing uncertainty.
Additionally, Trump revealed that Elon Musk’s government efficiency team had uncovered irregularities while reviewing data at the US Treasury Department.
On Friday, the S&P 500 index dropped 1% amid growing tariff concerns. The decline was exacerbated by reports of decreasing consumer sentiment, partly due to inflation worries. The dollar strengthened, while US Treasuries saw losses across the board. However, job figures indicated a slowing but still healthy labor market, with nonfarm payrolls rising by 143,000 in the previous month after upward revisions to earlier figures.
Powell’s Upcoming Testimony and Market Outlook
Powell’s semiannual testimony is set to occur as Federal Reserve officials have indicated they are not rushing to ease monetary policy. This will add further weight to the market’s expectations for only one US rate cut this year, especially as inflation data is due later this week.
Hong Kong Markets Perform Well Amid Chinese Tech Optimism
Despite the broader market downturn, Hong Kong shares opened higher on Monday. This was driven by growing optimism surrounding China’s advancements in artificial intelligence, which boosted confidence in the nation’s tech companies.
“We maintain a relatively positive outlook on risk assets,” said Jin Yuejue, an investment specialist at JPMorgan Chase & Co. Asset Management. “Although market volatility has led to some position trimming, there are still promising opportunities in China, particularly in tech innovation.”
South African Rand Falls Amid US Aid Freeze
In other news, South Africa’s rand dropped in early trading following the US government’s decision to freeze all aid to the nation. This decision came after Trump’s claims of human rights violations tied to a new land-expropriation law, as well as allegations of genocide against Israel. The South African foreign ministry responded by expressing concern over the lack of factual accuracy in Trump’s order.
Commodities: Oil Steady After Weekly Declines
In the commodities market, oil prices remained stable after experiencing several weeks of decline. The market is still adjusting to the potential impact of Trump’s tariffs and the uncertainty they bring.
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