NEW YORK : A gauge of global stocks erased earlier declines to trade flat, while U.S. Treasury yields advanced on Tuesday as investors assessed the latest U.S. tariff salvo and Federal Reserve Chair Jerome Powell signaled a patient path for rate cuts.
President Donald Trump on Monday raised tariffs on steel and aluminum imports to 25 per cent from the previous 10 per cent, eliminated country exceptions, as well as product-specific exclusions, and promised to announce global reciprocal tariffs within days.
But Trump also said he was considering an exemption for Australia and that the steel and aluminum measures would only take effect from March 4, keeping alive the view for some investors that the duties are being used as a negotiating tool.
Mexico, Canada and the European Union on Tuesday condemned the move, with the EU saying the 27-nation bloc would take “firm and proportionate countermeasures”.
On Wall Street, the S&P 500 eked out a slight gain as the benchmark index erased its earlier declines. Powell indicated the central bank was in no rush to adjust its policy stance, and also said it was not the role of the Fed to comment on tariff or trade policy, but to react to its impact on the economy.
“Valuations are elevated, company guidance is measured, inflation is persistent, government policy is uncertain, tariff talk is ongoing and global tensions are elevated. So in aggregate, the level of uncertainty is high, which implies increased volatility,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management.
A gain of nearly 5 per cent in Coca-Cola shares helped lift the Dow Industrials into positive territory after the beverage company reported its quarterly results.
The Dow Jones Industrial Average rose 123.24 points, or 0.28 per cent, to 44,593.65, the S&P 500 rose 2.06 points, or 0.03 per cent, to 6,068.50 and the Nasdaq Composite fell 70.41 points, or 0.36 per cent, to 19,643.86.
MSCI’s gauge of stocks across the globe rose 0.2 point, or 0.02 per cent, to 873.99.
The pan-European STOXX 600 index rose 0.23 per cent to close at a record high, led by bank stocks.
Treasury yields maintained gains after Powell’s testimony as investor attention turns to the latest reading of consumer prices on Wednesday.
The yield on benchmark U.S. 10-year notes climbed 4 basis points to 4.535 per cent and has advanced for four straight sessions, its longest run of gains in a month.
Markets have been slowly scaling back expectations for rate cuts from the U.S. central bank this year, largely expecting the Fed to hold rates steady at its March and May meetings. For the June Fed meeting, markets are pricing in a 51 per cent chance for a cut of at least 25 basis points in June, down from 63.6 per cent a week ago, according to CME’s FedWatch Tool.
The dollar index, which measures the greenback against a basket of currencies, fell 0.41 per cent to 107.92, with the euro up 0.53 per cent at $1.0361.
Against the Japanese yen, the dollar strengthened 0.31 per cent to 152.46 while sterling firmed 0.62 per cent to $1.2443.
“We’ve seen a lot of volatility come off of tariff headlines in the last two weeks,” said Helen Given, FX trader at Monex USA in Washington.
“But what we’re seeing now is that those headlines and those announcements are not necessarily an indication that these tariffs are actually going to be levied, at least not at the time that we think that they might be.”
Oil prices rose to a two-week high on Russian and Iranian supply concerns, although the tariff announcement curbed gains somewhat.
U.S. crude settled up 1.38 per cent to $73.32 a barrel and Brent settled at $77 per barrel, up 1.38 per cent on the day.
