From Marc to Market:
Overview: The US made good on its threats to levy 25% tariffs on Canada and Mexico, and 10% tariffs on China. There still seems to be skepticism in the market, with many thinking the tariffs on Canada and Mexico may not last the week. Trump will reportedly talk with Trudeau and Sheinbaum today. The dollar did not trade high so much it was marked sharply higher in initial activity. That the Canadian dollar and Mexican peso was hit the hardest is not surprising, but the euro, Australian dollar, and Swedish krona drop has been nearly as greater as the Canadian dollar. The South African rand has also been targeted following the US threat to cut all funding to South Africa for a law passed month that gave the government the power to acquire land from private parties if it is in the public interest (eminent domain?).
Equities seemed to do well last week despite the pending tariffs, though pre-weekend activity saw North American markets fall. Today the reality struck. Hong Kong was an island of stability amid sharp regional losses of as much as 3.5% in Taiwan, and more than 2.5% in Japan and South Korea. Europe's Stoxx 600 is off 1.5% to snap a four-day advance. It is the largest decline in over a month. US index futures are pointing to 1.3%-1.6% losses. European benchmark 10-year yield are 4-5 bp lower, while the 10-year US Treasury is little changed near 4.55%. The US two-year yield is up nearly eight basis points to 4.27%, while European two-year yields are off 4-6 bp, and Canada's is eight basis points lower. Gold recovered from its initial sell-off (to ~$2772) and has returned to the $2800 area. The record high set before the weekend was slightly above $2817. March WTI gapped higher and reached nearly $75.20 before stalling. It is hovering near $74 now.
USD: The Dollar Index gapped higher in response to the tariff announcements. The pre-weekend high was slightly above 108.55, near the 20-day moving average. Today's low is about 109.16. The peak so far was near 109.90. The high from mid-January was a little shy of 110.20. President Trump indicated he will talk with Canada's Trudeau and Mexico's Sheinbaum today....
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