Financial Markets Under Pressure
World markets were rattled on Tuesday as US stock futures fell, the dollar strengthened sharply and Hong Kong's Hang Seng Index shed recent gains. The trade standoff between the US and China escalated as the two sides traded new tariffs, fueling fears of a global economic conflict.
Markets React to New Tariffs
S&P 500 futures, which had earlier risen amid a temporary truce in US trade talks with Canada and Mexico, fell 0.2%. European indices also fell 0.1%. The euro weakened and broke through the $1.02 mark, as investors fear the EU could be caught up in the tariff storm.
The weakening currencies affected the Canadian dollar and the Mexican peso, which had earlier strengthened amid the agreements with Washington. At the same time, the US dollar index rose by 0.2%, reaching 108.78.
Hong Kong's Hang Seng, which had earlier updated two-month highs on expectations of possible talks between Beijing and the White House, lost momentum and ended up 2% below its daily peak.
New tariffs: China strikes back
The additional 10% US tariffs on Chinese exports came into effect at exactly 05:01 GMT. Beijing was quick to announce an investigation into Google and tariffs on US oil, coal, gas, cars and farm equipment, which will take effect on February 10.
"The situation remains extremely volatile. I expect further uncertainty, a stronger dollar and a stronger yuan above 7.40," said Jeff Ng, head of macro strategy at SMBC in Singapore.
Experts say that if the US and China fail to find common ground, this could trigger long-term instability in global markets, with investors forced to seek safe havens.
Currencies react: the yuan and Australian dollar are in the red
Amid the introduction of new US tariffs, the offshore yuan fell to 7.3236 per dollar, reflecting investor concerns about future economic clashes between the US and China. At the same time, the Australian dollar, often seen as an alternative to the Chinese currency on global markets, also fell. Its rate fell by 0.7% to $0.6180.
China on hold: Beijing's signal in focus
With Chinese markets closed for the Lunar New Year holiday, traders and analysts are closely watching the currency target set by the Chinese central bank on Wednesday morning. The move could provide hints about Beijing's strategy in the upcoming talks with Washington.
Trump vs. Xi: Will there be a compromise?
The White House press service said that Donald Trump plans to hold telephone talks with Chinese leader Xi Jinping in the coming days. However, unlike the successful talks with Canada and Mexico, the prospects for a deal with China remain unclear.
"This is a completely different situation: China is not just a trading partner, but an economic and political rival of the United States," said Naka Matsuzawa, chief macro strategist at Nomura in Tokyo. In his opinion, Trump will not abandon tariff pressure without large-scale economic concessions from Beijing.
Volatility in the market: oil, gold and bitcoin in the spotlight
The White House's decisive actions in the field of trade policy led to a stormy start to the week on financial markets. The Canadian dollar demonstrated the widest daily range of fluctuations since the beginning of the pandemic, and the cryptocurrency market did not stand aside - bitcoin fell by 3%, reaching $ 98,750.
Amid instability, investors began to move into safe haven assets, which led to an increase in gold prices - the metal approached historical highs. At the same time, the yield on 10-year US Treasury bonds rose by 3 basis points, reaching 4.57%.
Experts warn: if the conflict between the world's largest economies continues to escalate, even more powerful fluctuations await global markets.
Fed Prefers Not to Intervene
The recent events related to the escalation of trade tensions between the US and China are likely to strengthen the position of the US Federal Reserve, which prefers to stay on the sidelines and not to interfere in the market turbulence. According to analysts, the regulator will continue to adhere to a cautious tactic, refraining from abrupt steps in the conditions of growing uncertainty.
Major banks report profits
Meanwhile, leading financial institutions presented their quarterly reports. UBS Group (UBSG.S) managed to beat analysts' expectations for profits for the fourth quarter and announced a share buyback program, which strengthened the bank's position in the market. In turn, BNP Paribas also showed results above forecasts, but lowered its profit target for the current year, causing some concerns among investors.
Google in the crosshairs: AI investments raise questions
On Tuesday, after the close of trading in the US, Google (GOOGL.O) will present its financial statements. Investors will be closely monitoring the company's data on spending on artificial intelligence, as significant investments in this area are becoming an important factor in assessing the future profitability of the tech giant.
Oil corrects after growth
After a sharp jump in oil prices at the beginning of the week, the market began to decline. Brent crude futures hit a one-month low of $75.03 a barrel, weighed down by growing concerns about demand amid volatile geopolitics and a slowing global economy.
European markets weighed by trade risks
European stocks extended their losses on Tuesday, reflecting investor concerns about an intensifying trade war between the world's largest economies.
The pan-European STOXX 600 index (.STOXX) was down 0.3% by 08:19 GMT, extending a negative trend after its biggest one-day drop in a month on Monday.
The auto sector (.SXAP) lost about 1%, weighed down by investor concerns about export restrictions.
The telecom sector (.SXKP) slipped 0.8%, led by a 5.6% drop in Vodafone after the company said the situation in Germany worsened in the third quarter.
China Strikes Back
The escalating trade conflict between the United States and China has entered a new phase, with Beijing announcing tariffs on certain categories of American imports. The move was a retaliatory measure to the 10% tariffs imposed by Washington on Chinese goods.
Analysts warn that if the conflict continues to escalate, global markets could face even more significant shocks, leading to increased volatility and a shift of capital to safe havens.
A temporary reprieve: Tariff pause for Canada and Mexico
Amid growing tensions in global trade, US President Donald Trump's decision to delay the introduction of 25% tariffs on Mexico and Canada for 30 days has become a small signal of stabilization. The move was the result of negotiations during which Washington obtained concessions from neighboring countries on border control and the fight against crime.
Despite the remaining risks, investors perceived the decision as a tactical respite that could help temporarily stabilize the markets.
High-tech gainers: Infineon surprised investors
Amid the general decline on European stock exchanges, the German chipmaker Infineon (IFXGn.DE) was a striking exception. Its shares soared by 11.1% after the company reported strong financial results for the first quarter, which exceeded analysts' forecasts. In addition, the company raised its full-year revenue forecast, which was a positive signal for the entire technology sector.
This news supported the technology index (.SX8P), which rose by 1.41% despite the general turbulence in the markets.
Financials are strengthening
Shares of European banks also showed cautious growth: the banking sector index (.SX7P) added 0.3%.
French BNP Paribas (BNPP.PA) stood out in particular, with shares rising by 1.6%. The bank reported a strong rise in net profit in the fourth quarter, beating market forecasts. However, investors were concerned by a downward revision to its 2025 profit target, raising questions about the long-term prospects of Europe's largest lender.
Markets await further signals
Despite temporary relief in the form of a trade pause between the US, Canada and Mexico, global uncertainty remains high. Investors continue to monitor signals from the White House, China and the world's leading central banks. The question of whether the trade conflict will escalate or de-escalate further remains open - and it is on this that further market dynamics will depend in the coming weeks.
