US stock markets retreated and gold hit a fresh high Tuesday as traders kept a nervous eye on US President Donald Trump’s next tariff moves and worried about inflation and interest rates.
European and Asian equity markets struggled for direction while oil prices climbed.
Trump has lived up to his campaign pledges to resume his hardball trade diplomacy, signing off on steel and aluminium tariffs and warning of more measures to come.
While the moves have jolted sentiment, equities have held up since Trump took office, with analysts saying measures have so far been less severe than feared.
Still, caution looms over trading floors as dealers brace for the next announcement out of the White House.
Asian markets struggled to maintain the momentum from Monday, with Hong Kong and Shanghai falling.
In Europe, Frankfurt’s DAX 40 index set a new record above 22,000 points, while Paris edged higher and London slipped.
For tariffs to be effective, “the administration needs to keep everyone guessing and this creates uncertainty for financial markets”, noted AJ Bell investment director Russ Mould.
“The administration is clearly prepared to implement tariffs rather than just using them as a negotiating tactic,” he added.
The uncertainty fuelled by Trump’s moves has pushed safe-haven gold ever higher. It extended gains Tuesday to hit a new peak above $2,942 an ounce.
All three main US indices started the week on the front foot thanks to a rally in tech firms.
But fears that Trump’s tariffs, along with tax cuts and deregulation, will reignite inflation and force the Federal Reserve to keep interest rates elevated have sent the dollar up against most of its peers, although it traded mixed on Tuesday.
Readings on consumer and producer price indexes this week will provide a fresh snapshot of inflation, while Fed boss Jerome Powell is also due to speak with US lawmakers.
Both will be pored over for an idea about the bank’s plans for rates, with forecasts for two cuts at most this year.
“Investors will be very interested to hear what Mr Powell has to say about tariffs, particularly how they may affect inflation,” said David Morrison, senior market analyst at financial services provider Trade Nation.
Focus remained also on the latest company earnings season which was nearing its end.
Britain’s BP shares slid after it pledged to “fundamentally reset” its strategy in the face of tumbling profits.
Trump on Monday raised the tariff rate on aluminium to 25% from 10% “without exceptions or exemptions” and is set to announce reciprocal tariffs this week on all countries that impose duties on US goods.
Among other sectors, which are sensitive to metal prices, home construction lost 2.3%.
British homebuilder Bellway lost 5.5% after the homebuilder also said it was mindful of affordability concerns.
Heavy-weight BP lost 0.8% after the oil giant pledged to reset the company’s strategy as it reported a 35% fall in annual profits.
Entain slumped 10.1% after the British bookmaker announced the sudden departure of CEO Gavin Isaacs after just five months in the top role.
“Isaacs’ sudden departure has clearly spooked investors. While Entain’s chair Stella David is steadying the ship as interim CEO, the lack of a permanent boss makes the group vulnerable if a rival betting group or private equity outfit came sniffing around for takeover opportunities,” AJ Bell investment director Russ Mould, said.
Airline stocks fell after TUI flagged a slowdown in bookings. Wizz Air fell 6.1%, Easyjet dropped 3.7% and British Airways-owner IAG was down 1.6%.
The travel and leisure sector lost 2%.
A speech by the Bank of England Governor Andrew Bailey is due at 1215 GMT.
Meanwhile, BoE policymaker Catherine Mann said she voted for a half-point interest rate cut last week to “cut through the noise” about the right stance for policy, but said rates needed to remain restrictive.
On the data front, markets are gearing up for a US inflation report on Wednesday and British gross domestic product (GDP) figures on Thursday, which could affect expectations for the BoE’s rate path.
Wall Street’s main indexes dipped on Tuesday as most megacap stocks fell, while investors awaited a testimony from Federal Reserve Chair Jerome Powell for insight on tariffs and their impact on inflation in the world’s biggest economy.
Most megacap and growth stocks ticked lower, while some steelmakers extended gains from the previous session, when President Donald Trump substantially raised tariffs on steel and aluminium imports.
Inflation data, due on Wednesday, also dominated market focus ahead of Fed Chair Powell’s semiannual monetary policy testimony before the Senate Banking, Housing and Urban Affairs Committee on Tuesday.
Now that there are some actual numbers on tariffs, “(Powell) is going to have to provide some clarity”, said Adam Turnquist, chief technical strategist for LPL Financial.
“He can’t really punt on those questions because there’s enough details where the Fed speaker should have an opinion on at least on some of these measures.” On Wednesday, the January consumer price index (CPI) reading will be released at 8:30 a.m. ET, with Powell set to testify before the House Financial Services Committee later on.
Traders expect at least one 25-basis-point interest-rate cut from the Fed this year, and a 60% chance of another reduction of the same magnitude, according to LSEG data.
Cleveland Fed President Beth Hammack said the need to get inflation back on target will keep monetary policy on pause for now.
Meanwhile, steelmakers Cleveland-Cliffs and Steel Dynamics rose 2.1% and 1.1%, respectively, a day after Trump announced steel and aluminium levies that are set to take effect on March 4.
aluminium Century aluminium gained 9.9%.
Trump also said he would follow Monday’s action with announcements over the next two days about reciprocal tariffs on all countries that impose duties on US goods.
On Tuesday, megacaps such as Microsoft, Meta , and Tesla were down between 0.4% and 0.9%.
Apple, however, added about 1% after a report said it was partnering with Alibaba to develop and roll out artificial intelligence features for iPhone users in China.
At 09:46 a.m. ET, the Dow Jones Industrial Average fell 108.74 points, or 0.24%, to 44,361.67, the S&P 500 lost 14.79 points, or 0.24%, to 6,051.65 and the Nasdaq Composite lost 55.41 points, or 0.28%, to 19,658.86.
United Arab Emirates Dirham Exchange Rate
