(Bloomberg) — Relief that Donald Trump refrained from imposing specific tariffs on China on his first day in office sent U.S. stock futures higher on Monday. The dollar collapsed.
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Trump was sworn in as president and promised to sign a series of executive orders that same day. For now, these measures will not include new tariffs on the United States’ three largest trading partners.
Contracts on the S&P 500 rose 0.4% as Wall Street was closed Monday for a holiday. The dollar gauge fell about 1%, extending its decline from a 13-month high hit earlier in January.
The new administration has moved away from a full-scale trade war and toward potential engagement with Beijing, according to people familiar with the matter. Trump plans to issue a broad memorandum directing federal agencies to study trade policies and existing trade relationships with China, Canada and Mexico, The Wall Street Journal reported Monday.
This suggests he plans to pursue a more deliberative approach to trade relations, as he moves to quickly implement his policy agenda through a series of executive orders.
“I think, and maybe this is just a hope, that Trump is backing off from his most extreme rhetoric, particularly on the deportation and tariff fronts,” said Marvin Loh, macroeconomic strategist at State Street Global Markets.
Monday’s sharp moves in stock and currency futures, on a day when much of U.S. trading was closed, nevertheless provided a taste of the uncertainty and volatility to come, according to Michael Green , chief strategist at Simplify Asset Management.
“The challenge is are you protecting yourself against the risk of tariffs, or against the risk that the expected tariffs will not be applied? Green said in an interview with Bloomberg TV. “It’s becoming a really challenging environment, which is probably translating into higher implied volatility.”
Trump’s domestic inflationary agenda, from tax cuts to fiscal spending, could keep the dollar strong and Treasury yields high. For one thing, Nomura Holdings Inc. joined T. Rowe Price in seeing a chance that 10-year Treasury yields could hit 6% this year, while a small group of bond traders think the next measure of the Federal Reserve in terms of interest rates will increase interest rates. them, contrary to the majority opinion that rates will be reduced.
“Any further stimulus that triggers a shock to growth and inflation could lead to a cycle of Fed rate hikes, for which markets are largely unprepared,” wrote Iain Stealey, global CIO for securities at fixed income at JP Morgan Asset Management, in a note to clients.
The Mexican peso retreated from session highs earlier, following Trump’s promise to declare a state of national emergency at the southern border. Trump’s plan to invoke emergency powers to boost domestic energy production, while moving away from renewable sources, has triggered declines at Siemens Energy AG, Enel SpA and Vestas Wind Systems A/S. Crude oil fell.
Cryptocurrency traders, meanwhile, reaped their first rewards when Bitcoin hit another record high after Trump and his wife Melania unveiled their own memecoins over the weekend. The digital currency traded flat after erasing earlier gains.
Here’s how Wall Street reacted when Trump was sworn in:
Steve Chiavarone, senior portfolio manager and head of multi-asset at Federated Hermes:
In general, the market views Trump’s agenda as pro-growth. Today, markets mainly focus on pricing policy. There was nothing really new during the inaugural speech. This is one of the reasons why the dollar is weaker and stock indexes are higher. Executive Orders will be the next area to watch.
Steve Sosnick, chief strategist at Interactive Brokers:
The dollar’s weakness is driven by reports of softer tariffs, which should be beneficial for multinational stocks that dominate major indexes. Crypto is at an all time high – maybe he didn’t give it enough love in his speech.
John McClain, portfolio manager at Brandywine Global Investment Management:
The market will headline headlines aggressively in the coming days. Patient, long-term investors should benefit from volatile swings in sentiment.
Key events this week:
Annual World Economic Forum in Davos begins Monday
Donald Trump will be sworn in as the 47th President of the United States on Monday
Jobless claims in the United Kingdom, unemployment, Tuesday
Canadian CPI, Tuesday
New Zealand CPI, Wednesday
CPI in Malaysia, rate decision, Wednesday
Retail sales in South Africa, CPI, Wednesday
ECB President Christine Lagarde and other officials speak in Davos on Wednesday.
South Korea’s GDP on Thursday
Euro zone consumer confidence, Thursday
Turkey rate decision on Thursday
Norway rate decision on Thursday
Retail sales in Canada, Thursday
Trump to join World Economic Forum for online ‘dialogue’
CPI in Japan, rate decision, Friday
India, Eurozone, UK PMIs, Friday
ECB President Christine Lagarde and BlackRock CEO Larry Fink speak in Davos on Friday.
And here are the main market developments:
Actions
S&P 500 futures rose 0.4% to their highest level since Dec. 26 at 2:24 p.m. New York time.
Dow Jones Industrial Average futures rose 0.4% to their highest level since Dec. 17.
The MSCI World Index rose 0.3%, climbing for the fifth straight day, the longest winning streak since December 26.
Currencies
The Bloomberg Dollar Spot Index fell 0.9%, more than any closing loss since August 23.
The euro jumped 1.2%, more than any closing gain in about 14 months
Sterling jumped 1.1%, more than any closing gain in about 13 months.
The Japanese yen rose 0.3% to 155.76 per dollar
The Mexican peso jumped 1.2%, more than any closing gain since January 6.
Cryptocurrencies
Bitcoin fell 0.3% to $103,216.37
Ether rose 3.4% to $3,339.84
Bonds
The yield on 10-year Treasury bills changed little at 4.63%
The German 10-year yield changed little at 2.53%
The UK 10-year yield was little changed at 4.66%
Raw materials
West Texas Intermediate crude fell 1.2% to $76.98 a barrel
Spot gold rose 0.2% to $2,709.91 an ounce
This story was produced with the help of Bloomberg Automation.
