Markets hopeful but on edge for Trump`s second term

General market commentary

Global markets experienced heightened volatility on Tuesday following the inauguration of President Donald Trump, as investors reacted to mixed signals on his trade policies. Initially, there was relief as Trump’s inaugural speech did not immediately address tariffs, leading to a brief rally in equities and U.S. Treasuries. However, the mood quickly soured when he suggested potential 25% tariffs on Mexico and Canada, sending the Mexican peso and Canadian dollar lower and causing a reversal in global equity gains. U.S. share futures pared their earlier gains, while European and Asian indices remained cautious, reflecting the uncertainty surrounding Trump’s trade plans, especially concerning China.

In commodities, oil prices softened after Trump’s announcement of a national energy emergency aimed at boosting U.S. oil and gas production, which added to concerns about global supply dynamics. Brent crude fell near its lowest level in over a week, while gold gained amid the market turbulence. Currency markets saw the dollar rebound after earlier losses, with the euro and sterling both weakening. Meanwhile, China's share markets were volatile, with investors on edge over the potential impact of Trump’s tariff threats on the country’s exports. Overall, while there were initial signs of optimism, the market remains in a state of flux, awaiting clearer signals from the new administration.

Latest market and economic update

Asian markets showed mixed performance in volatile trading, with Hong Kong's Hang Seng index gaining 0.8%, while China’s CSI 300 and Shanghai Composite, along with South Korea's KOSPI, saw slight declines. Investor sentiment remained cautious amid ongoing uncertainty about potential future tariffs, as President Trump signalled a review of U.S. trade policies, particularly with China, Mexico, and Canada.

U.S. equity index futures struggled to gain momentum on Tuesday after President Trump announced he was considering 25% tariffs on Canada and Mexico, disappointing traders who had hoped for a delay. Despite this, market participants remained focused on Trump’s pro-business agenda, with key earnings reports expected from major companies this week.

European shares closed flat on Monday, with the pan-European STOXX 600 ending at 523.87 points after hitting a three-month high earlier in the session. Germany's DAX rose 0.4%, while the Eurozone banking index and basic resources sector both gained 1.2%. Notably, Nemetschek surged 10.4% following strong results, while Siemens Energy dropped 3.4% after a downgrade by UBS. The utilities sector saw the biggest losses, falling 1.1%.

The dollar index rose to approximately 108.5 on Tuesday, regaining some of the previous session's losses following President Trump’s remarks about considering 25% tariffs on Canada and Mexico. The euro weakened to 1.0399 against the dollar, as the greenback strengthened across the board, with the Canadian dollar and Mexican peso experiencing the largest declines.

Bitcoin retreated towards $100,000 after peaking at over $109,000, as volatility continues following Donald Trump's inauguration. Investors are awaiting an executive order from Trump prioritising crypto assets, alongside plans for a cryptocurrency advisory council and deregulation to support the sector.

Oil prices fell in volatile Asian trade, with Brent and WTI crude both seeing declines, partly due to Trump’s national energy emergency declaration aimed at boosting U.S. energy production. However, losses were capped by a weaker dollar and concerns over tighter oil supply, as Trump signalled more sanctions on Venezuela and flagged ongoing U.S. sanctions on Russian crude.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

President Donald Trump signed an executive order delaying the TikTok ban for 75 days, giving the app more time to find a U.S. buyer. The order follows Trump's push for a deal that would ensure at least 50% U.S. ownership of TikTok’s domestic operations, with reports suggesting Elon Musk could be a potential buyer.

Banco Santander SA is considering exiting the UK market, potentially selling its retail and commercial banking operations. This follows lower returns from its UK business and a £295 million provision for costs linked to a car loan mis-selling case.

Glencore has expressed openness to mergers and acquisitions that create value for shareholders, with its strong position as a leading copper producer. Despite unsuccessful talks with Rio Tinto and a failed $23 billion bid for Teck Resources, Glencore remains keen on strategic deals, although its coal operations could deter potential buyers.

UBS has reiterated its Buy rating on Siemens AG, with analyst Andre Kukhnin continuing to view the equity as a strong investment opportunity. As part of this positive outlook, the target price for Siemens has been increased from €200 to €240, reflecting confidence in the company’s performance and future prospects.

Siemens Energy's share price has surged over 300% in the past year, but UBS has downgraded its rating to "sell," citing concerns that the company's growth is overly priced in. UBS highlighted potential risks in Siemens Gamesa's turnaround, including market share erosion and delays, and set a price target of €38 per share, up from €23.

Upcoming data and events

Notable US companies reporting earnings today include Charles Schwab Corporation and Netflix, which are expected to impact market dynamics significantly. Additionally, the Philadelphia Fed Manufacturing Index is anticipated to provide insights into the manufacturing sector's performance.

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