Trump’s tariff intimidation continues to rattle markets

At Friday’s close, the Dow Jones Index (US30) decreased by 0.99% (for the week +0.08%). The S&P 500 Index (US500) lost 0.95% (for the week +0.94%). The Nasdaq Technology Index (US100) fell by 1.30% (for the week +1.93%). Stocks in the US declined during the afternoon session as investors grappled with new tariff concerns, inflation worries and the latest jobs report. Markets moved sharply lower following reports that President Trump is considering retaliatory tariffs, which could lead to higher rates for US trading partners. Investors were further worried by the University of Michigan’s consumer sentiment report, which showed that annual inflation expectations rose to 4.3%, the highest since November 2023. Meanwhile, the January jobs report showed that the US economy added 143,000 jobs, slightly below expectations, but the unemployment rate fell to 4.0%.

The US President Donald Trump said on Sunday he would announce additional 25% tariffs on all US steel and aluminum imports, as well as impose retaliatory duties on what he considers unfair trade practices. Canada, Brazil, Mexico, Mexico, South Korea and Vietnam are the largest exporters of steel to the US, government data show. Canada is also the largest exporter of aluminum to the United States.

The Canadian dollar traded near 1.43 per US dollar, rebounding from 22-year lows of 1.455 hit on January 31, as strong labor market data limited the need for the Bank of Canada to cut rates. Canada’s unemployment rate fell to 6.6% in January from 6.7% in December, defying expectations of a rise to 6.8% and easing fears of labor market weakness highlighted by the Bank of Canada. However, Ivey’s PMI fell to 47.1 from 54.7, well below expectations of 53, the lowest reading since December 2020 and reinforcing expectations of policy easing. In addition to the dovish outlook, the Bank of Canada plans to resume asset purchases in March, aiming to reinstate bond purchases in the secondary market by 2026.

Mexico’s annual inflation rate slowed for a third month in January 2025, hitting a four-year low of 3.59%, slightly below market projections of 3.61%. The rate is now below the top end of the Central Bank’s target range of 2% to 4%. The annualized core inflation rate rose to 3.66% in January from December’s 3.65%, but fell short of market estimates of 3.70%.

Equity markets in Europe were mostly down on Friday. Germany’s DAX (DE40) fell by 0.53% (for the week +2.28%), France’s CAC 40 (FR40) closed down 0.43% (for the week +2.40%), Spain’s IBEX 35 (ES35) lost 0.33% (for the week +4.67%), and the UK’s FTSE 100 (UK100) closed negative 0.31% (for the week +0.31%). German industrial production fell more than expected at the end of 2024, recording the largest decline in five months. On the Eurozone corporate front, L’Oréal fell more than 4% after reporting its slowest quarterly sales growth since the pandemic. Porsche also fell nearly 7% after announcing asset impairments and a 2025 sales estimates that fell short of expectations.

Silver rose to $32.5 an ounce on Friday, its highest in three months, on the prospect of weaker financial conditions, higher demand for inputs and tight supply. Traders remain bullish on multiple Fed rate cuts this year. The ECB, BoE, RBNZ and RBI are also on a softer policy stance.

WTI crude oil prices rose 0.5% to reach $71/bbl on Friday after new sanctions were imposed on Iran’s oil exports, but gains were limited by US President Donald Trump’s escalating trade dispute with China and the threat of new tariffs against other countries. Despite these gains, the benchmark recorded its third consecutive weekly decline, down around 2%, mainly due to escalating trade tensions caused by President Trump’s recent announcements of imposing tariffs against China and other countries. Analysts have expressed concerns that these trade disputes could dampen global economic growth and consequently reduce oil demand.

The US natural gas prices (XNG/USD) were down slightly at $3.35/MMBtu on Friday, but are up nearly 10% this week. The increase was driven by higher LNG exports and prognoses of colder weather expected to boost heating demand. Gas flows to LNG export plants also increased to 15.1 Bcf/d in February from 14.6 Bcf/d in January, close to December’s record.

Asian markets were mostly falling last week. Japan’s Nikkei 225 (JP225) fell by 0.37%, China’s FTSE China A50 (CHA50) rose by 1.92%, Hong Kong’s Hang Seng (HK50) gained 5.41%, and Australia’s ASX 200 (AU200) was negative 0.24%.

China’s annualized inflation rate for January 2025 rose to 0.5% from 0.1% in December, beating the market consensus expectations of 0.4%. This is the highest rate since August 2024, driven by seasonal effects associated with the Lunar New Year celebrations at the end of the month. The latest result also reflected the impact of recent government stimulus measures and the Central Bank’s supportive monetary policy aimed at helping the economy. Core consumer prices excluding food and energy rose by 0.6% y/y, the highest in 7 months. Producer prices in China were 2.3% y/y in January 2025, maintaining the same pace as the previous month and beating market estimates of 2.1%. This was the 28th consecutive month of producer price deflation.