2025-02-07 11:10

Trump tariff risk still tops market worry list Canadian dollar, euro could weaken more: analysts Autos sector firmly in losing camp too China's yuan buffered for now LONDON, Feb 7 (Reuters) - U.S. President Donald Trump , opens new tab's ability to swiftly impose, and then delay, tariffs on top trading partners has left world markets swinging one way and then another. Last weekend, for example, he announced sweeping tariffs on Canada, Mexico and China, and then on Monday he announced one-month delays for Canada and Mexico. These moves show that the risk of a global trade war that hurts economic growth and fuels inflation remains high. "The warning shot that has been fired by the White House has confused the world at large," said Tina Fordham, founder and geopolitical strategist at Fordham Global Foresight. "Who's next? How will we know if we will be on the sharp end of U.S. tariff ire? And how do we respond? Acquiesce, or hit back?" Here's where some hard-hit markets stand almost a week after Trump launched his salvo: 1/ SHAKEN LOONIE Canada's dollar , has been in the firing line, briefly hitting over 20-year lows before rebounding on the tariff delay, leading to its largest single-day swing in nearly five years. But the reprieve for the so-called Loonie may not last since the prospect of 25% tariffs remains. Even if tariffs are avoided, uncertainty could weigh on business activity, keeping Canada on a rate-cutting path. The loonie ended January down for the fifth straight month, its longest losing streak since 2016; currency volatility remains high. CBA forecasts dollar/Canadian dollar at 1.52 by the third quarter, from 1.44 now. 2/ VOLATILE PESO Volatility has been embedded in Mexico's currency since last year, when it lost almost a fifth of its value against the dollar . The tariff threats, direct and indirect, have seen the peso fall as much as 2.2% this year, and also gain as much as 3.5%. In a scenario of 25% tariffs, Wall Street analysts expect the Mexican economy to fall into a recession. The peso, which ended January at 20.678 per dollar, is seen weakening to as much as 22 or further per dollar according to BBVA. This would imply a weakening of more than 7% from current levels. The peso hasn't traded beyond 22 since November 2021. 3/ EURO DOUBLE WHAMMY Trump says the European Union is next in line for tariffs, keeping the euro under pressure . It has slid 5% since the U.S. election, one of the biggest fallers among major currencies, briefly hitting $1.0125 on Monday -- the lowest since late 2022. Nearly one-third of strategists polled by Reuters reckon the euro could fall to $1 within a year as trade uncertainty hurts the economy. The U.S. is the EU's most important trading partner, with $1.7 trillion in two-way goods and services trade. Further denting the euro, markets anticipate the European Central Bank will cut rates by around 40 basis points more than the Federal Reserve will this year. Europe could also be a big loser in a U.S.-China trade war. "If Chinese goods cannot reach the U.S., they will end up in Europe adding to disinflationary pressure," said George Saravelos, Deutsche Bank's global head of FX research. 4/ CAR TROUBLE Autos, already pummeled by trade worries, may be in the losing camp - although they too have felt some relief in recent days. Stellantis (STLAM.MI) , opens new tab, which owns the Fiat and Peugeot brands, and Germany's Volkswagen posted share-price falls of more than 7% on Monday before recovering. European autos share valuations are particularly depressed. Rivals are also fretting. Ford CEO Jim Farley reckons the U.S. carmaker could weather a few weeks of tariffs, but prolonged 25% duties on Mexico and Canada "would have a huge impact on our industry, with billions of dollars of industry profits wiped out, and an adverse effect on the U.S. jobs." Japan's Nissan (7201.T) , opens new tab, Toyota (7203.T) , opens new tab and Honda (7267.T) , opens new tab make some of their most popular U.S. models in Canada or Mexico, so tariffs could hurt them as well. 5/ CHINA SHRUGS China is the only major trading partner Trump has actually imposed tariffs on, with a limited reaction so far. The closely managed yuan is slightly stronger than it was right before Trump took office, , and Hong Kong (.HSI) , opens new tab and mainland shares (.CSI300) , opens new tab are higher. Bank of Singapore chief economist Mansoor Mohi-uddin believes one reason for this is that China's initial retaliation has been muted, with tariffs on select U.S. exports to China that amounted to just $14 billion in exports last year. This leaves "the door open for a potential deal between Washington and Beijing to avert a more damaging broader trade war," he said. U.S. levies on China are also well below the 60% Trump threatened during the election. China meanwhile has not allowed the yuan to weaken sharply to mitigate the tariff impact. Concern about the damage a weak currency would have on investor confidence, and relations with other trading partners, has prevented Beijing from allowing a significantly weaker yuan, analysts say. Sign up here. https://www.reuters.com/markets/global-markets-trump-tariffs-2025-02-07/

2025-02-07 11:04

LONDON, Feb 7 (Reuters) - The pound regained some ground on Friday after dropping on Thursday when the Bank of England cut interest rates and halved its growth forecast for the year. Sterling was last up 0.16% at $1.2458 on Friday, after falling 0.54% the previous day. The pound fell as much as 1.1% after the Bank of England cut rates to 4.5% and slashed its growth forecast for this year to 0.75%, half the previous estimate. It regained some ground when BoE Governor Andrew Bailey told Bloomberg that markets should not read too much into a switch by some policymakers to vote for deeper rate cuts. Investors struggled to know how to react to the Bank's forecasts, which also said inflation would now peak at 3.7% this year - sharply above a previous forecast of 2.8%. British bond yields, which move inversely to prices, initially fell but ended the day higher . "The Bank of England has a tough road ahead if it is to avoid potential stagflation," said Michael Pfister, FX analyst at Commerzbank. "I can fully understand why market participants are concerned about the new forecasts and are now pricing in sharper rate cuts. "However, the Bank of England has often surprised us in recent years. I would not be surprised to see another hawkish turn in March." Traders on Friday were expecting around 60 basis points on further BoE rate cuts this year, money market prices showed , little changed from before Thursday's decision. The BoE has cut three times since August, when rates stood at 5.25%. The euro was down 0.19% against the pound at 83.34, after rising 0.39% on Thursday. Sterling has slipped slightly against the dollar and euro this year, although its journey has been volatile. The pound dropped in early January as investors appeared spooked by Britain's sticky inflation, low growth and fiscal policies. Sterling has since recovered after data in mid-January showed underlying U.S. inflation was cooling - weighing on the dollar - although it has also swung as U.S. President Donald trump has threatened to ramp up global tariffs. Data on Friday showed UK house prices rose by more than expected last month as some buyers rushed to complete sales before an increase in property purchase taxes at the start of April, although the figures did little to move sterling. Sign up here. https://www.reuters.com/markets/currencies/pound-ticks-up-after-sliding-boe-cut-gloomy-forecasts-2025-02-07/

2025-02-07 10:57

SANTORINI, Greece, Feb 7 (Reuters) - Greek authorities are monitoring increased seismic activity on the island of Santorini, Prime Minister Kyriakos Mitsotakis said on Friday, urging the public to remain calm and follow the advice of the civil protection service. Greece has declared a state of emergency on Santorini as hundreds of earthquakes have rattled the popular tourist island over the past week, prompting the evacuation of more than 10,000 residents and workers. Authorities have warned of a high landslide risk on parts of the island and have shut schools, sent rescuers and advised residents to avoid indoor gatherings and ports that are surrounded by sheer rock faces. Army, fire service and police units have been deployed preemptively. Some of the measures have been extended to the islands of Amorgos, Ios and Anafi. "I want to assure the residents of Santorini and the neighbouring islands, which are being tested these days, that the state mechanism is on their side," Mitsotakis said during a brief visit to the island to inspect the state of readiness. "We hope this phenomenon ends quickly and the island fully returns to its normal pace," he said, adding that preparedness and prevention were pivotal. Greece, sitting on multiple fault lines, is one of Europe's most earthquake-prone countries. But the high seismic activity in the area of Santorini is unprecedented, seismologists have said, warning that it could last weeks or months. Sign up here. https://www.reuters.com/world/europe/greek-pm-says-state-monitoring-santorini-quakes-urges-calm-2025-02-07/

2025-02-07 10:54

A look at the day ahead in U.S. and global markets from Mike Dolan Another forecast miss from a U.S. megacap combines with caution ahead of January's employment report to keep a lid on stocks into Friday's open - with buoyant long-dated Treasuries squashing the yield curve to its flattest for the year. Much like Microsoft (MSFT.O) , opens new tab and Alphabet (GOOGL.O) , opens new tab over the past couple of weeks, Amazon (AMZN.O) , opens new tab disappointed Wall Street late Thursday as concern about cloud computing doused revenue and profit forecasts and sent its stock down 4% overnight. The latest underwhelming outlook from the "Magnificent 7" top U.S. tech firms reins in an otherwise upbeat S&P500 (.SPX) , opens new tab, with questions about heavy spends on artificial intelligence piqued again by the development of China's cheap DeepSeek model. The DeepSeek buzz, by contrast, continues to fire up Chinese stocks (.CSI300) , opens new tab. They added another 1%-plus earlier on Friday despite ongoing concerns about a mounting Sino-U.S. trade war and Monday's deadline for Beijing's retaliatory tariffs. But the day's macro events will likely take precedence, with the release of the January U.S. employment report and long-term revisions of past job creation. Job growth likely slowed to 170,000 in January from just over quarter of million the prior month, partly restrained by wild fires in California and cold weather across much of the country. Those distortions add a further complication to the readout, which will include annual benchmark revisions, new population weights and updates to the seasonal adjustments. The week's sweep of other labor market reports, however, do point to some cooling of conditions - with job openings falling, layoffs rising and weekly jobless claims ticking higher. With the Federal Reserve already trying to parse the impact of President Donald Trump's new economic policies, payroll distortions just cloud the picture even further. And as Fed officials insist they can wait and see for a bit, Fed futures remain trained on two more interest rate cuts this year - resuming about midyear. The Treasury market is more encouraged though - sustaining the early week's sharp drop in 10-year yields into today's jobs report and seeing the 2-to-10 year yield curve compress to the flattest it's been in six weeks. Helping the long end this week has been reassuring signals from the Treasury's quarterly refunding report that a "terming out" of debt auctions to longer maturities is not yet in the works, as many had feared. Treasury Secretary Scott Bessent has also insisted the new government's focus would be on getting long-term rates down rather than pressuring the Fed to ease prematurely. Reuters analysis shows Trump has placed holds on tens of billions of dollars in congressionally-approved spending for projects across the U.S. that range from Iowa soybean farmers adopting greener practices to a Virginia railway expansion. Bessent also doubled down on his view the administration wants to retain a "strong dollar" policy. But he colored that with a sideswipe. "What we don’t want is other countries to weaken their currencies, to manipulate their trade." But with the Fed on hold, central banks around the world continued easing interest rates apace this week - partly on concerns a trade tariff war will weaken their economies. With a sharp cut in its UK growth forecast, the Bank of England cut its policy rate by a quarter point on Thursday - with two of its policymakers voting for a bigger half point reduction. Sterling weakened initially, but has steadied since. Mexico's central bank also cut its interest rate by 50 basis points on Thursday - saying it could cut by a similar magnitude in the future as inflation cools and after the economy contracted slightly late last year. The European Central Bank, meantime, is expected to release its updated estimate of what it sees as a "neutral" interest rate later on Friday. That's important as it informs the ECB debate about whether it needs to cut rates below what considers neutral to revive the flagging euro zone economy. It's currently seen around 2% - 75bps below the standing policy rate. In thrall to the payrolls release, the dollar index (.DXY) , opens new tab was steady on Friday. Dollar/yen briefly notched a new low for the year, however, as Bank of Japan tightening speculation simmers. In Europe, stocks (.STOXX) , opens new tab stalled near record highs as the heavy earnings season there unfolded. Banks there have a been a standout winner this week and again on Friday. Danske Bank (DANSKE.CO) , opens new tab, Denmark's biggest lender, was up 7.1% after it posted record annual profits and launch a new share buyback programme. Key developments that should provide more direction to U.S. markets later on Friday: * U.S. January employment report, University of Michigan February consumer survey, December consumer credit; Canada Jan employment report; Mexico Jan inflation * European Central Bank updates its estimate of "R*" neutral interest rate * Federal Reserve Board Governors Michelle Bowman and Adriana Kugler speak; Bank of England Chief Economist Huw Pill speaks * U.S. corporate earnings: Cboe Global Markets, Fortive, Kimco Realty * Japan Prime Minister Shigeru Ishiba visits United States Sign up here. https://www.reuters.com/markets/us/global-markets-view-usa-pix-2025-02-07/

2025-02-07 10:47

LONDON/BRUSSELS, Feb 7 (Reuters) - The European Union will launch its joint purchasing platform for critical resources with hydrogen buying in September, three EU sources told Reuters. Critical minerals purchases will follow, possibly in the third quarter, while gas will be the last with no firm timing, said the three sources, who declined to be named. The bloc wants to pool buying orders to hand participants more leverage to achieve better deals for critical minerals, essential for the green transition, that are traded in thin and opaque markets dominated by China. The EU chose PriceWaterhouseCoopers and a Slovak software company to develop its platform for joint purchases after a competitive tender, Reuters reported last month. The idea grew out of an existing mechanism for joint buying of natural gas, AggregateEU, which was launched during the energy crisis in 2022. AggregateEU will close at the end of March after a final round of matching buyers and sellers, and the new platform will take its place, the sources added. Under AggregateEU, member states were obliged to bring certain volumes of gas demand to the platform. By contrast, the new joint purchasing mechanism will be voluntary, the sources said. They added another difference would be that the deals will be reported, although the prices will not be included because they are deemed to be commercially sensitive. Some industry sources have criticised the plans, saying just bringing together buyers and sellers was not very useful. The sources noted, however, EU legislation does not allow for EU purchasing and deal-making, only for matching supply and demand. It is unclear how much gas has been bought under AggregateEU, since companies are not obliged to report this to the European Commission. One of the sources said the new platform's aim was to provide all the information needed to facilitate a deal. "We do not plan to step in and replace the markets," the source said. "We are trying to be the interface, providing a tool that would actually support the market." Sign up here. https://www.reuters.com/world/europe/eu-set-launch-joint-buying-hydrogen-september-2025-02-07/

2025-02-07 10:28

MOSCOW, Feb 7 (Reuters) - Rafael Grossi, head of the International Atomic Energy Agency (IAEA), said on Friday that the number of attacks on the Russian-controlled Zaporizhzhia nuclear power plant in Ukraine had increased, Russia's TASS state news agency reported. Grossi was speaking after holding talks in Moscow with Alexei Likhachev, head of Russian nuclear corporation Rosatom. Russian forces took control of the plant soon after the start of the war with Ukraine in 2022 and Moscow has said the Zaporizhzhia region, which it does not fully control, is now part of Russia, an assertion which Kyiv rejects. Rosatom said in a statement after the Grossi-Likhachev talks that Ukraine was constantly carrying out attacks on Energodar, the closest town to the nuclear plant. But Grossi was quoted by TASS as saying that it was impossible to determine which side was carrying out the attacks based on the examination of drone fragments. "The small fragments of plastic or wood left by the alleged drones do not allow us to speak about the origin of these fragments. However, I would like to assure you that I am raising these issues at the highest level of international discussions," Grossi was cited as saying. Sign up here. https://www.reuters.com/world/europe/un-nuclear-chief-says-number-attacks-zaporizhzhia-nuclear-plant-has-increased-2025-02-07/