MARKET WRAPS
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Trading updates from Intertek Group, Compass Group, LondonMetric Property
Opening Call:
European stock futures fell after Donald Trump said he will impose additional tariffs on Mexico, Canada and China. Asian benchmarks were mixed; the dollar rallied; Treasury yields steadied; while oil and gold futures edged higher.
Equities:
Stock futures dropped early Tuesday while the dollar rallied after U.S. President-elect pledged to impose tariffs on Mexico, Canada and China after taking office.
Posting on his Truth Social platform, Trump said that on the first day of his presidency he will charge Mexico and Canada a 25% tariff on all products coming into the U.S. He added in a separate social-media post that he would impose an additional 10% tariff on all products that come into the U.S. from China.
Traders have been "quick to hit the panic button," said Matt Simpson, market analyst at FOREX.com and City Index. "We still have just under two months until Trump begins to sign his executive orders. It leaves plenty of time for turbulence as sentiment switches on a dime, multiple times over," Simpson added.
Forex:
Trump's latest tariff comments have reignited forex market volatility, rattling MXN, CAD and CNH. Despite Mexico and Canada being signatories to the USMCA trade agreement, and the risk to China already partially expected and priced in, markets have taken fright, DBS strategist Chang Wei Liang said.
"I fully expect Trump to pursue protectionist policies, and build on what he did in his first term," RBC Capital Markets' Alvin T. Tan said. "It is again worth noting that most of the tariffs he levied on China imports are still in place, and he will likely raise them further in my view," Tan said.
Trump's pick of Scott Bessent for treasury secretary had soothed concerns, as the ex-hedge fund manager had publicly said tariff threats are a negotiation tool, DBS's Chang said. But Chang reckons Trump's protectionist tendencies and unpredictability imply that market uncertainty will persist, "no matter who is Treasury Secretary."
Bonds:
Longer-term Treasury yields ended sharply lower overnight, sending prices higher on optimism that President-elect Donald Trump's choice of Scott Bessent as Treasury secretary could help lower budget deficits.
The bond market is brimming with optimism that Trump's pick for Treasury secretary will rein in deficits and bring a more strategic approach to fiscal policy. "Scott Bessent is the proverbial 'adult in the room,' and markets like it," said market watcher David Rosenberg.
Energy:
Oil futures edged higher early Tuesday, even as talk of a potential cease-fire deal between Israel and Lebanon-based Hezbollah leading prices to shrink their "security premium."
Speculation over a ceasefire in Lebanon, "combined with what appears to be restraint on the part of Iran, means that the probability of a supply disruption, intentional or accidental, is greatly diminished," said Michael Lynch, president at Strategic Energy & Economic Research.
Metals:
Gold rose in Asia after falling 3.4% on Monday, its biggest daily percentage decline since early November, on reports that Israel was nearing a ceasefire with Hezbollah, UOB said.
Trump's nomination of Scott Bessent for the post of Treasury secretary also soured the precious metal's safe-haven appeal, UOB added.
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After a week in Chile's copper belt, Citi analyst Ephrem Ravi said it's clear miners "are all copper bulls" who increasingly accept copper projects will cost more but that prices will also likely be higher in the long run. "Beware groupthink," he said.
If projects get approved on an expectation of higher prices in future, it may push a long awaited bull market in copper further down the road, said Ravi. "The corporates now seem much more comfortable with copper project intensity nearer $30,000/metric ton of annual copper output -- and this implies a [long term] copper price near US$5/pound or higher to generate investor-acceptable returns," he said.
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Iron ore rose amid signs of increased infrastructure investment in China. Infrastructure spending rose in the country from 1.0% on month seasonally adjusted in September to 1.7% in October--the biggest expansion since November 2023, CBA's Vivek Dhar said.
The increase in spending reflects the government's recently announced debt-swap program, he said. Infrastructure investment accounts for 25%-30% of China's steel demand, Dhar estimated.
TODAY'S TOP HEADLINES
Trump Pledges Tariffs on Mexico, Canada and China
WASHINGTON-President-elect Donald Trump pledged that soon after taking office he will slap steep tariffs on Mexico and Canada, two of America's closest allies, as well as China, the clearest indication since his election victory that he plans to follow through on the tough campaign rhetoric that helped propel him to the White House.
Posting on his Truth Social platform, Trump said that on the first day of his presidency he will charge Mexico and Canada a 25% tariff on all products coming into the U.S. He added in a separate social-media post that he would impose an additional 10% tariff on all products that come into the U.S. from China, though he didn't specify whether that levy would come on his first day in office. Such a tariff would come on top of existing tariffs the U.S. has already imposed on Chinese goods.
Markets Cheered Bessent for Treasury. Trump Isn't Done Yet.
President-elect Donald Trump's selection of a relative moderate for Treasury secretary was met with a sigh of relief in the markets.
The prevailing view is that Scott Bessent, assuming he's confirmed by the Senate, will be a moderating figure on some of the less market-friendly policies Trump has planned, such as tariffs.
Israel and Hezbollah Edge Closer to Cease-Fire
Israel's security cabinet will vote Tuesday on a cease-fire agreement with Hezbollah, Israeli and U.S. officials said, a deal that would end fighting that has destabilized Lebanon and displaced hundreds of thousands of people.
An Israeli official said the cabinet is expected to approve the pact, but the parties warned against counting on a deal before it was done. Israel has launched thousands of airstrikes in Lebanon since September and invaded the country on Oct. 1 in an effort to degrade Hezbollah, an Iranian-backed militant group. The offensive has killed many of the group's leaders and wrought destruction throughout Lebanon, though Hezbollah has maintained its ability to fire missiles into Israel.
ECB Rates Have Further to Fall, But How Fast Is Unclear, Says Makhlouf
The European Central Bank's key interest rate is on a downward path, but the speed of its decline is unclear due to the murky outlook for the eurozone economy and U.S. policy, the head of Ireland's central bank said.
The ECB has cut its key rate three times since June in response to cooling inflation, and is expected to lower borrowing costs again when policymakers next meet in December, although investors aren't sure how large that move will be.
Mexico Gets Cold Feet Over New Chinese EV Plant After Trump Win
Chinese electric-vehicle maker BYD is finalizing plans for a factory in Mexico, a push that will test Donald Trump's trade policies and the Mexican government's appetite for conflict with the president-elect.
BYD officials say the company is aiming to reach a deal with Mexico state officials to break ground on a factory near one of the automotive hubs in central or northern Mexico.
Zoom Earnings Beat Estimates
Zoom Communications posted better than expected third-quarter financials on Monday.
Zoom reported third-quarter adjusted earnings of $1.38 a share on revenue of $1.18 billion. Analysts surveyed by FactSet were expecting the video communications platform to report earnings of $1.31 a share on revenue of $1.16 billion.
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Expected Major Events for Tuesday
00:01/UK: Nov Shop Price Index
06:00/FIN: Oct Labour force survey, incl unemployment
07:00/SWE: Oct PPI
09:00/POL: Oct Retail Sales
09:00/ICE: Oct PPI
11:00/FRA: 3Q OECD trade statistics release
11:00/UK: Nov CBI Distributive Trades Survey
13:00/POL: Oct Broad money M3
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(END) Dow Jones Newswires
November 26, 2024 00:01 ET (05:01 GMT)
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