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By Rae Wee
SINGAPORE (Reuters) – Global stocks and U.S. Treasuries were volatile on Tuesday, reversing a brief relief rally from earlier in the session in the early hours of Donald Trump’s new presidency after he announced plans for commercial rates in neighboring countries.
US markets were closed on Monday for a holiday, so the first reactions to Trump’s inauguration were felt during Asian trading on Tuesday.
Trump said his administration is considering imposing 25 percent tariffs on Mexico and Canada as soon as Feb. 1, a move that dampened investors’ hopes for a delay after they had been cheering the brief mention of tariffs in his opening speech.
Trump’s plans for major import tariffs and tax cuts are a key area of focus for financial markets, on the view that these policies will stoke inflation and get the US economy going again, which that would boost the dollar and hurt bonds.
US stock futures reacted quickly to the latest developments by reversing gains from earlier in the session, with Nasdaq futures falling 0.4% while S&P 500 futures fell 0.25 %.
EUROSTOXX 50 futures and FTSE futures each lost 0.3%, while Japan’s Nikkei reversed early gains and was last down 0.4%.
“At some point, we’re pretty sure that Trump will start to move forward with the tariff measures… It’s pretty clear what his intention is,” said Khoon Goh, head of Asia research at ANZ.
“Just because I didn’t address this on day one doesn’t mean it’s off the agenda. It’s certainly firmly on the agenda, we just have to wait and see what shape or form it takes.”
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.2%.
In the Treasury market, the benchmark 10-year U.S. Treasury yield pared some early losses but remained four basis points below 4.5682%. Yields move inversely to bond prices.
The last two-year Treasury yield was 4.2424%.
The overall market moves reflected a strong reversal from the previous session after Trump failed to stop from imposing new tariffs in the early hours of his presidency, which in turn sent the dollar broadly lower.
The greenback has since clawed back those losses, leaving 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% to 20.69. It also rose 0.8% against the Canadian dollar to C$1.4423.
“Investors now face a new reality where sudden policy changes and increased volatility are the norm,” said Boris Kovacevic, global macro strategist at Convera.
