manaloplay US tariff and inflation fears rattle global markets

Traders work on the floor at the New York Stock Exchange in New York, Thursday, Jan. 2, 2025. (AP Photo/Seth Wenig)

New York, United States — Stock markets were rattled Wednesday by worries about incoming US president Donald Trump slapping tariffs on imports as well as the fading prospects for interest rate cuts.

A CNN report that Trump is considering declaring a national economic emergency to provide legal cover to impose tariffs on all imported goods sent US and European stocks into the red and the dollar higher against major rival currencies.

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“Perhaps more than even during his last term of office, traders will need to pay close attention to everything coming from the new president,” said David Morrison, senior market analyst at Trade Nation.

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“And, just to prove a point, the dollar has soared while risk assets have tumbled on reports that Trump is mulling a national emergency declaration to allow for a new tariff program.”

READ: Record-high gov’t debt spooks investors

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Susannah Streeter, head of money and markets at Hargreaves Lansdown, said that there is nervousness about the future given Trump’s unpredictable governing style.

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“Aside from the impact on global trade and growth prospects, the big worry is that a big swath of tariffs will stoke the embers of inflation and fan consumer prices,” she said.

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“Expectations are growing that this will tie the Fed’s hands and limit interest rate cuts in the US even further this year,” she added, referring to the US central bank.

The Federal Reserve has already lowered its outlook for rate cuts to two reductions this year, down from the four forecast in September before Trump’s election victory.

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Data released Tuesday and Wednesday pointed to price pressures and a relatively robust US labor market, denting hopes of several more cuts to interest rates in the world’s biggest economy.

The diminished expectations of rate cuts are “weighing on big tech stocks in particular, given that a higher rate environment pushes down the value of their future earnings,” said Streeter.

US bond yields have also risen in recent days on the fading expectations of additional US interest rate cuts.

Focus now turns to Friday’s release of the key non-farm payrolls report, which will provide a fresh snapshot of the US economy.

US stocks ended the day modestly higher and markets will be closed on Thursday to mark the death of former US president Jimmy Carter.

In Europe, German industrial orders fell more than five percent in November, official data showed Wednesday, in the latest sign of headwinds facing the continent’s largest economy.

On the corporate front, shares in British energy giant Shell slid 1.4 percent on a weak trading update ahead of its full year results, capping gains on London’s benchmark FTSE 100 index.

Asian stock markets closed mostly down Wednesday.

Key figures around 2140 GMT

New York – Dow: UP 0.3 percent at 42,635.20 points (close)

The 26 members of the governing council are gathering in Slovenia, as they make one of their regular tours away from the ECB’s headquarters in Frankfurt.

New York – S&P 500: UP 0.2 percent at 5,918.25 (close)

New York – Nasdaq Composite: DOWN 0.1 percent at 19,478.88 (close)

London – FTSE 100: UP less than 0.1 percent at 8,251.03 (close)

Paris – CAC 40: DOWN 0.5 percent at 7,452.42 (close)

Frankfurt – DAX: DOWN less than 0.1 percent at 20,329.94 (close)

Tokyo – Nikkei 225: DOWN 0.3 percent at 39,981.06 (close)

Hong Kong – Hang Seng Index: DOWN 0.9 percent at 19,279.84 (close)

Shanghai – Composite: FLAT at 3,230.17 (close)

Euro/dollar: DOWN at $1.0316 from $1.0342 on Tuesday

Pound/dollar: DOWN at $1.2361 from $1.2479

Dollar/yen: UP at 158.38 yen from 157.98 yen

Euro/pound: UP at 83.44 pence from 82.87 pence

Brent North Sea Crude: DOWN 1.2 percent at $76.16 per barrel

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West Texas Intermediate: DOWN 1.3 percent at $73.32 per barrelmanaloplay

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