Markets react to U.S. tariff moves, gold shines

February 11, 2025 (MLN): Gold hit a record high, the dollar was firm and Hong Kong shares advanced to a four-month peak on Tuesday as investors navigated shifts in U.S. trade policy and waited to hear from Federal Reserve Chair Jerome Powell on tariffs and inflation.

Oil prices clung to a sharp overnight bounce.

Hong Kong's Hang Seng has rallied more than 12% in a month as Donald Trump's administration has threatened, then suspended, blanket tariffs on Canada and Mexico seemingly confirming investor assumptions that everything is negotiable.

Trump on Monday lifted tariffs on steel and aluminium imports to 25%, pushing up share prices of U.S. steelmakers, as Reuters reported.

A tariff of 10% on Chinese imports took effect earlier in the month and retaliatory Chinese duties on U.S. energy and some goods came into effect on Monday.

There has been little sign of progress toward a trade arrangement between Beijing and Washington, but expectations for a breakthrough remain high.

"He's a business person by nature, so there are deals to be done at some point," said Prashant Bhayani, chief investment officer in Asia at BNP Paribas Wealth Management.

"So that's why the market's been measured."

In currency trade the Chinese yuan has weakened past the 7.3 per dollar level and traded at 7.3071 on Tuesday morning.

The Australian dollar was steady at $0.6273, with Trump saying he would give "great consideration" to Australia's request for exemption on steel tariffs.

Gold hit a record peak just above $2.935 an ounce.

"This is still very early days," said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

“The market's just sort of chopping around rather than really directional right now.”

Against the Japanese yen, the dollar was steady at 152.01 yen and it sat at $1.03 per euro

The Canadian dollar  and Mexican peso had slipped as those countries bear the brunt of Trump's metal tariffs.

On Wall Street, U.S. stocks closed higher, led by gains in the energy and tech sectors.

The S&P 500 materials index rose 0.5%, buoyed by steel companies such as Nucor, up 5.6%, and Steel Dynamics, which advanced 4.9%.

Shares of McDonald's climbed 4.8% after the fast-food restaurant reported quarterly results. 

"Investors are basically saying, 'Hey, let's go back into the areas that worked.' And one reason that investors are optimistic, in my opinion, is because of earnings," said Sam Stovall, chief investment strategist at CFRA Research.

Europe's continent-wide STOXX 600 index rose 0.58% to close at a record high of 545.92 on Monday, led by a 1.5% climb in the oil and gas sector, where energy prices were spiking.

Dutch and British wholesale gas prices rose to around two-year highs on Monday as colder weather increased demand for gas and storage withdrawals rose.

Fed Chair Powell is due to speak on Tuesday for the semiannual monetary policy testimony before the Senate Banking, Housing and Urban Affairs Committee.

His comments on tariffs and inflation are likely to be closely monitored.

Markets are largely expecting the Fed to hold rates steady at its March meeting, with expectations for a cut of at least 25 basis points not climbing above 50% until June, according to CME's FedWatch Tool. 

Benchmark 10-year Treasury yields closed at 4.495% and were untraded in the Asia session owing to a public holiday in Japan. 

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