Trump Shakes Up Trading With Mixed Levy Signals: Markets Wrap

Jan 21, 2025 by Bloomberg
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Equity futures in Australia, Japan, Hong Kong and mainland China all pointed to gains when markets open.

Financial markets gave a mixed verdict on US President Donald Trump’s first day in office as traders took heart from an absence of immediate sweeping tariffs on all trade partners, while also expressing caution over likely future measures.

Chinese shares led gains in Asia after Trump at least initially opted against announcing any new levies on the country. At the same time, the dollar rose as he said he planned to impose threatened tariffs of as much as 25% on Canadian and Mexican imports as soon as Feb. 1. Treasuries advanced.

The limited commentary on trade restrictions so far underscores the risk of higher volatility across financial markets as he kickstarts his second four-year term. The whipsaw trading in Asia came after US stock futures had rallied and the dollar fell Monday when Trump had appeared to be holding off from using executive orders to impose higher global tariffs.  

  

“We believe investors would need to brace for bouts of volatility and whipsaw trading driven by news reports, market chatter and social media posts,” said Chetan Seth, a strategist at Nomura Holdings Inc. “Our view is that a stabilization in Asian equities will likely only occur once the specter of tariffs is behind us, and we think we are clearly not there yet.”

The Canadian dollar and Mexican peso both tumbled as much as 1.4% following Trump’s tariff threats. Bloomberg’s dollar gauge climbed 0.7%. Meanwhile, Treasury 10-year yields fell 9 basis points to 4.54% as traders recalibrated inflation bets in the absence of sweeping levies.

Investors had been on tenterhooks for the first executive orders to stem from the White House after Trump vowed to quickly implement his “America First” agenda. Since his November election victory, everything from the Australian dollar to European equities had been whipsawed on concern widespread tariffs would add to global trade frictions, while the dollar surged as the Federal Reserve turned more cautious on easing policy. 

“We’re thinking in terms of 25% on Mexico and Canada, because they’re allowing vast numbers of people,” into the country, Trump told reporters at the Oval Office. “I think we’ll do it February 1.”

The yen was the only Group-of-10 currency to gain versus the dollar, rising to a one-month high, as traders positioned for a possible Bank of Japan interest-rate hike at a policy decision due Friday. 

While refraining from imposing new China tariffs, Trump ordered his administration to address unfair trade practices globally and investigate whether Beijing had complied with a deal signed during his first term. 

“With 25% now providing an anchor point, markets will no doubt start to worry whether China, the next target on Trump’s tariff agenda, will face an even higher rate,” said Jun Rong Yeap, a market strategist at IG Asia Pte. “Looking ahead, we may still expect tariffs to be implemented with some ‘fire and fury,’ but the current dynamics may favor a more reactionary approach over a predictive one.”

In commodities, oil swung between gains and losses as traders digested a slew of pledges and executive orders from Trump including plans to boost domestic production. Iron ore rallied, while Bitcoin dropped for a fourth day.

WATCH: “I always say tariffs are the most beautiful words to me in the dictionary,” Trump said during his inauguration.Source: Bloomberg

Here is a selection of comments made by analysts during Asian trading:

Charu Chanana, chief investment strategist at Saxo Markets:

The tariff respite was short lived, as expected, with the latest headline signaling that tariffs have been delayed but not averted. However, it seems like Canada and Mexico are in the focus but negotiation hopes are kept alive for China, suggesting China markets may still be supported.” 

Kinger Lau, chief China equity strategist at Goldman Sachs Group Inc.:

Our base case is that the US will raise tariffs on China by 20 percentage points, but the timing is highly uncertain. If that’s the case China should be able to digest that. We think there will be some positive response by the Chinese government to soften the external headwinds as well as facilitate economic rebound from external demand to internal demand.

Fiona Lim, senior FX strategist at Malayan Banking Bhd.:

We have to monitor how he negotiates with China and how President Xi reacts. Any sign of frictional trade policies coming up will still be negative on the yuan. Should the trade negotiations drag on, yuan’s decline may be less sharp but it can also be prolonged as well

Philip McNicholas, Asia sovereign strategist at Robeco Singapore Private Ltd.:

China is clearly next in the line of fire from potential tariffs, so it could add to the upward pressure on the USD/CNH. The Canada-Mexico news has reversed the softer USD tone, but this just brings us back to the 2016-2020 period; market just has to remember its coping strategy then — that higher volatility will be the mainstay

Key events this week: 

  • UK jobless claims, unemployment, Tuesday
  • Canada CPI, Tuesday
  • ECB President Christine Lagarde and other officials speak at Davos, Wednesday
  • South Korea GDP, Thursday
  • Eurozone consumer confidence, Thursday
  • Trump will join the World Economic Forum for an online “dialogue”
  • Japan CPI, rate decision, Friday
  • India, euro area, UK PMIs, Friday
  • ECB President Christine Lagarde and BlackRock CEO Larry Fink speak at Davos, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.2% as of 1:51 p.m. Tokyo time
  • Nikkei 225 futures (OSE) were little changed
  • Japan’s Topix was little changed
  • Australia’s S&P/ASX 200 rose 0.7%
  • Hong Kong’s Hang Seng rose 1.1%
  • The Shanghai Composite rose 0.2%
  • Euro Stoxx 50 futures fell 0.3%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.3%
  • The euro fell 0.2% to $1.0390
  • The Japanese yen rose 0.3% to 155.13 per dollar
  • The offshore yuan fell 0.1% to 7.2706 per dollar

Cryptocurrencies

  • Bitcoin fell 0.2% to $102,269.39
  • Ether fell 1.5% to $3,230.99

Bonds

  • The yield on 10-year Treasuries declined nine basis points to 4.54%
  • Japan’s 10-year yield declined one basis point to 1.180%
  • Australia’s 10-year yield declined seven basis points to 4.41%

Commodities

  • West Texas Intermediate crude fell 0.7% to $77.36 a barrel
  • Spot gold rose 0.7% to $2,727.30 an ounce

This story was produced with the assistance of Bloomberg Automation.

©2025 Bloomberg L.P.

By Chiranjivi Chakraborty , Aya Wagatsuma

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