European stocks were on track for a positive start following reassuring comments from President Donald Trump about the US economy and a potential breakthrough in the ongoing conflict in Ukraine. Futures for European equity indices surged by up to 1.2%, while US stock contracts also saw an uptick after Trump downplayed concerns about an impending recession, easing some market jitters.
In Asia, stock markets rose for the first time in four days, with Australia’s S&P/ASX 200 index hovering near correction levels. The uptick in sentiment came after Trump’s new tariffs on steel and aluminum imports took effect, with no exemptions, prompting retaliatory measures from the European Union.
US Treasuries saw slight gains, while the dollar strengthened against all its Group-of-10 counterparts.
Geopolitical and Economic Factors Impacting Markets
Trump’s controversial tariff policies, geopolitical shifts related to Ukraine, persistent inflation, and uncertainty around the Federal Reserve’s interest rate cuts have caused significant volatility in global markets this year. US stocks are teetering on the brink of a correction, with the VIX volatility gauge near its highest levels since August, reflecting ongoing concerns about economic growth. A similar gauge for Treasuries has reached its highest level since November, indicating market unease.
Ken Wong, an equity portfolio specialist at Eastspring Investments, commented, “Any relief from the geopolitical noise is a good thing for markets right now.” He pointed to the recent ceasefire agreement in Ukraine and the easing of tariff tensions between the US and Canada as positive developments for market sentiment.
Trump’s Economic Reassurance
During a meeting with business executives, Trump sought to reassure investors about the economy, emphasizing his administration’s commitment to accelerating approvals, particularly concerning environmental regulations. He also mentioned the upcoming announcement of a major electricity project and reiterated his support for tax reductions for companies manufacturing in the US.
Despite market concerns, Trump remained optimistic about the US economy, stating at the White House, “I don’t see [a recession] at all. I think this country’s going to boom.” He acknowledged that market fluctuations are normal but insisted that the US must prioritize rebuilding its infrastructure.
Ukraine Ceasefire and Global Tensions
In terms of global politics, Trump’s stance on Ukraine has evolved. Just weeks after his tense confrontation with Ukrainian President Volodymyr Zelensky, Trump pressured Russia to accept a proposed ceasefire agreement. The agreement, negotiated between US and Ukrainian officials in Saudi Arabia, calls for a 30-day halt in the conflict, which began with Russia’s full-scale invasion three years ago. The proposal now hinges on Russian President Vladimir Putin’s acceptance.
Market strategist Jun Rong Yeap of IG Asia noted that with risk appetite at extreme bearish levels, there may be room for a short-term recovery, though such a bounce remains fragile without a clear catalyst.
US Tariffs and Retaliation from the EU
Trump’s new tariffs on steel and aluminum imports, which came into force on Wednesday, have intensified his trade wars with key US allies. These tariffs are part of a broader effort to restore the US industrial base, which has shifted overseas over the years. The president announced last month that a 25% duty would be imposed on these metals.
In response, the European Union implemented countermeasures, including tariffs on American goods valued at €26 billion ($28.3 billion). The European Commission, the EU’s executive arm, promised swift and proportionate actions in retaliation.
Inflation Concerns and Market Outlook
Investors are also eyeing the upcoming US consumer inflation data, scheduled for release later on Wednesday. The consumer price index (CPI) is expected to rise by 0.3% in February, following a 0.5% gain in January. Market analysts, including Kyle Rodda from Capital.com, warned that persistent inflation could limit the Federal Reserve’s ability to cut interest rates, especially if Trump’s economic policies lead to a sharp slowdown in growth.
In the commodities market, oil prices extended their gains as the US adjusted its forecast for global oversupply. Gold also maintained its upward momentum, buoyed by safe-haven demand.
Key Market Events
- Canada’s rate decision, Wednesday
- US Consumer Price Index (CPI), Wednesday
- Eurozone industrial production, Thursday
- US Producer Price Index (PPI) and initial jobless claims, Thursday
- US University of Michigan consumer sentiment, Friday
Market Moves
Stocks:
- S&P 500 futures rose by 0.3%
- Nasdaq 100 futures gained 0.3%
- MSCI Asia Pacific Index increased by 0.1%
- Japan’s Topix rose by 0.9%
- Hong Kong’s Hang Seng fell by 0.4%
- Shanghai Composite remained unchanged
- Euro Stoxx 50 futures climbed 1.1%
Currencies:
- Bloomberg Dollar Spot Index up by 0.2%
- Euro down by 0.1% to $1.0904
- Japanese yen fell by 0.2% to 148.09 per dollar
- Offshore yuan dropped by 0.1% to 7.2374 per dollar
- British pound decreased by 0.2% to $1.2929
Cryptocurrencies:
- Bitcoin fell by 1.5% to $81,526.73
- Ether dropped by 3.6% to $1,867.14
Bonds:
- 10-year Treasuries yield dropped by 2 basis points to 4.26%
- Germany’s 10-year yield rose by 6 basis points to 2.90%
- Britain’s 10-year yield advanced by 3 basis points to 4.67%
Commodities:
- Spot gold increased by 0.1% to $2,919.37 an ounce
- West Texas Intermediate crude rose by 0.4% to $66.50 a barrel
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