By Tom Westbrook
SINGAPORE (Reuters) – Gold shot to a record high, the dollar was firm and stocks were subdued on Tuesday as investors braced for further 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 bounce, with Brent crude futures above $76 a barrel. European equity futures were flat, as were FTSE futures while U.S. stock futures fell 0.2%.
Trump on Monday raised tariffs on steel and aluminium imports to 25%, pushing up share prices of U.S. steelmakers, and has promised to announce global reciprocal tariffs within days.
Yet he also said he was considering an exemption for Australia, after a call with Australia’s Prime Minister – seemingly confirming investor assumptions that everything is negotiable.
Retaliatory Chinese duties on U.S. energy and some goods came into effect on Monday, though the Hang Seng notched four-month peaks as investors wagered on an eventual deal. The Hang Seng was last about 0.4% lower but it has rallied more than 12% in a month on investor enthusiasm for artificial intelligence and chip stocks.[.HK]
Mainland China stock indexes dipped slightly.
“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 its response).”
Some of the biggest movers in Hong Kong trade were electric vehicle stocks, with BYD’s Hong Kong shares hitting a record high after the company rolled out free smart driving features on almost all models including its Seagull, which costs just $9,555. Shares in the rest of the sector fell heavily.
Gold hit a record peak just above $2,942 an ounce, and has rallied 63% since the low of $1,809.50 an ounce on Oct. 23, 2023.
“Its surge reflects a combination of ongoing central bank buying to diversify away from the dollar, safe haven demand and positive momentum driving more buyers,” said Shane Oliver, head of investment strategy at AMP in Sydney.
FOREX
In currency trade, the Chinese yuan has weakened past the 7.3 per dollar level and traded at 7.3042 on Tuesday. The Australian dollar was steady at $0.6278.
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.
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.
Benchmark 10-year Treasury yields closed at 4.495% and were untraded in the Asia session owing to a public holiday in Japan, with traders shrugging off – for now – Trump appearing to question U.S. government debt figures.
“The markets are likely to be wanting to see more details about what this might mean,” said Mark Elworthy, head of fixed income, currency and commodity trading at Bank of America in Australia, with questions over whether Trump was possibly referring to internal departmental ownership of U.S. debt or the accounting treatment of Treasuries.
“I’m only guessing, but it will be interesting to see if more comes of this in the coming days.” (This story has been corrected to add the dropped word ‘all’ in paragraph 8)
(Reporting by Chuck Mikolajczak, additional reporting by Karen Brettell in New York and Noel Randewich in San Francisco; Editing by Rod Nickel, David Gregorio, Shri Navaratnam and Kim Coghill)
