U.S. President Trump's return to the White House has shaken global currencies and stock markets, bringing joy and disappointment. Investors are still trying to figure out what will happen in the next four years.
“It's going to be chaotic, unpredictable, spur-of-the-moment,” said Russel Matthews, senior portfolio manager of global macro at RBC BlueBay Asset Management. Driven by Trump himself.
Here are some of the winners and losers from Trump's first 24 hours in office.
1/ Policy uncertainty affects some currencies
Listing Canada and Mexico as potential tariff targets further affected their currencies, which fell sharply after Trump's inauguration speech.
Becky Chin, multi-asset manager at Fidelity International, said betting on the Mexican peso or other emerging market currencies affected by tariffs is too risky.
“It's so binary, so dependent on the dollar,” she said. “Policy uncertainty is too high.”
Goldman Sachs strategists said they see a 70% chance of Trump imposing 20% tariffs on China, but said the chances of him following through on his pledge to impose 25% import tariffs on Canada and Mexico are low.
The U.S. dollar is trading near its highest level in nearly five years against the Canadian currency, with the so-called Canadian dollar also weighed down by economic weakness and expectations of a rate cut.
Markets have turned to bets that China will not allow its tightly controlled currency to weaken in response to high U.S. tariffs. Analysts still expect a decline of 5% to 6% by the end of the year.
Fidelity's Qin said her position would profit if the offshore yuan weakened further against the dollar, which could be one of the few outperforming trades when aggressive tariffs spook the market.
2/ Currency market fluctuations
Encouraged by Trump's decision not to immediately impose tariffs, the euro and sterling rose more than 1% on Monday, posting their biggest one-day gains against the dollar since late November.
However, losses in European currencies on Tuesday suggested the relief rally was over.
Francesco Pesole, currency strategist at ING, said the euro could benefit if Europe is not explicitly mentioned in Trump's tariff comments.
“However, this support may prove to be rather short-lived as things can change suddenly due to protectionism – as we learned yesterday from Canada and Mexico – and the euro remains weak on many macro fundamentals. attractive,” he said.
ABN AMRO lowered its year-end forecast for the euro against the dollar from $1 to $0.98, which would imply a 5% depreciation from current levels.
3/ European stock markets rebound
European stocks were among the worst performers relative to Wall Street last year but have risen more than 3% so far in January as investors judged pessimism about economic growth and U.S. tariffs as overdone.
European stocks attracted the second-largest allocation from big investors in 25 years this month, Bank of America's latest global fund manager survey showed.
Amelie Derambure, senior multi-asset manager at Amundi, Europe's largest investor, said the group has upgraded its view on European equities to neutral from negative on valuation grounds and is bullish on European banks because they face relatively low tariff risks.
Despite U.S. policy risks, Citi economists expect euro zone economic growth to rise to 1% this year from 0.8% in 2024 as interest rate cuts by the European Central Bank boost business investment and consumer spending.
However, European stock markets, which have been most affected by U.S. trade policies, suffered heavy losses on Tuesday, with shares of automakers Stellantis, Volkswagen and BMW all falling.
4/Tariffs could hurt U.S. refineries
Trump vowed to increase U.S. oil and natural gas production, bolster strategic reserves and export U.S. energy around the world. U.S. oil prices also responded accordingly.
U.S. crude futures have fallen 4% over the past three sessions, while Brent has fallen just 2%.
The United States is already the world's largest crude oil producer, accounting for about 12% of total supply. It is also a major exporter, exporting about 4 million barrels per day.
But it faces competition. The OPEC+ group of major exporters, which includes Russia, wants to reverse self-imposed supply cuts but is worried about weak global demand.
Meanwhile, Trump's plan to impose 25% tariffs on Canadian imports could hurt U.S. refiners, which rely on neighboring countries for about 20% of their oil.
5/ Cryptocurrencies got off to a slow start
Notably, cryptocurrencies surged as Trump’s Nov. 5 election victory raised hopes for a friendlier regulatory environment, but suffered as his first set of policies made no mention of the asset class. Frustration.
Bitcoin, the world's largest cryptocurrency, retreated from an all-time high of $109,071 on Monday. Trump launches his own cryptocurrency Friday’s price was already 50% below Monday’s peak price of $74.59, according to cryptocurrency price tracker CoinGecko.
Analysts said Trump's inauguration speech disappointed those who had hoped he would trigger dramatic changes in U.S. cryptocurrency policy, potentially paving the way for more sell-offs. Others said some of his staffing was a positive sign.
Trump appointed two crypto-friendly figures – Mark Uyeda, a Republican member of the SEC, as the agency's acting chairman, and Paul Atkins, a former SEC commissioner. Paul Atkins manages the agency permanently.
- Reuters Additional editing by Jim Pollard
See also:
Xi Jinping lures Trump into new US-China trade deal
Ethics experts alarmed by Trump’s cryptocurrency launch
TikTok’s fate now lies firmly in Donald Trump’s hands
As the economy cools, young Chinese focus on saving
Biden restricts U.S. companies and allies' access to artificial intelligence chips
Trump says he and China's Xi Jinping may 'get along great'
Trump plans to crack down on China’s electric vehicle supply chain
China to take on more debt in response to Trump tariffs
China's central bank 'allows yuan to depreciate' as trade risk
