The uncertainty of the new US administration’s tariff policy negatively affects investor sentiment

At the end of Tuesday, the Dow Jones Index (US30) fell by 1.14%. The S&P 500 Index (US500) was down 0.76%. The Nasdaq Technology Index (US100) lost 0.28%. On Tuesday, stocks came under pressure after President Trump announced he would raise tariffs on steel and aluminum imports from Canada to 50% from 25% starting Wednesday in response to Ontario’s imposition of a 25% export tariff on US-sourced electricity. However, stocks partially recovered when Ontario Premier Ford said he would suspend the 25 percent tariff on electricity to the US when US Commerce Secretary Lutnick agreed to meet with him in Washington on Thursday. President Trump has also said he is considering eliminating the 50 percent tariffs he initially imposed on Canada.

Tuesday’s economic news in the US showed strength in the labor market, lending support to stocks after the January JOLTS Job Openings Index rose 232,000 to 7.74 million, beating expectations of no change at 7.60 million.

The Mexican peso remained stable at 20.35 in March. The peso was supported by high interest rates in Mexico, which support carry trade flows, as well as a solid external balance, including a trade surplus and strong remittances. However, weak domestic data, including a drop in consumer confidence and a 0.6% contraction in Q4 2024 GDP — the sharpest since 2021 — has reinforced expectations of a rate cut by the Bank of Mexico on March 27, which could undermine the peso’s attractiveness from a yield perspective.

Bitcoin (BTC/USD) rose more than 4% on Tuesday, recovering more than half of Monday’s losses on disappointment that President Trump’s new digital assets’ reserve will only be replenished with digital assets already owned by the government, rather than new digital assets acquired through seizures.

Equity markets in Europe were mostly down yesterday. Germany’s DAX (DE40) fell by 1.29%, France’s CAC 40 (FR40) closed down 1.31%, Spain’s IBEX 35 (ES35) lost 1.57%, and the UK’s FTSE 100 (UK100) closed down 1.21%. European stocks lost ground on Tuesday, extending their decline from the previous session to a one-month low, as the impact of a slowing US economy outweighed support from increased public spending by Eurozone governments. Companies more exposed to global discretionary demand suffered losses, with Inditex, Ferrari, and L’Oreal falling 1-2%. On the other hand, industrial giants continued to rise on the back of government promises to increase infrastructure and military investment. Schneider, Safran, Airbus added more than 0.6%, while Rheinmetall and Leonardo rose more than 4%, extending momentum for defense contractors. Automakers were also in focus, with Volkswagen shares rising 2% despite aggressive profit cuts and an uncertain future due to US tariffs as investors showed less pessimism than expected.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) fell 0.64%, China’s FTSE China A50 (CHA50) rose by 0.47%, Hong Kong’s Hang Seng (HK50) lost 0.01% and Australia’s ASX 200 (AU200) was negative 0.91%.

Japan’s largest companies have agreed to significant wage increases for the third consecutive year to help workers cope with rising inflation and ease labor shortages. Labor union group Rengo is pushing for a 6.09% average wage increase this year, the highest demand in 32 years. Broad wage growth is needed for the Bank of Japan to further raise interest rates from 0.5% and for the government to stimulate consumer spending amid stagnant inflation-adjusted wages.

China kept its economic growth target at “around 5%” while setting a record-high fiscal deficit of 4% of GDP. It also lowered its consumer inflation target to 2% and set a target to keep urban unemployment at 5.5%. The 2025 budget signals an increase in public spending to support economic growth.