EMEA Morning Briefing : Dollar Weakens After Trump's Latest Tariff Comments

MARKET WRAPS

Watch For:

Flash PMI data for eurozone, U.K., Germany, France; trading updates from Burberry Group, Signify, Givaudan

Opening Call:

European stock futures advanced early Friday. Asian stock benchmarks gained after Trump's comments on China tariffs; Treasury yields and the dollar fell; oil futures declined; while gold advanced.

Equities:

Stock futures rose early Friday, tracking gains in Asian equities following President Trump's comments appearing to downgrade the threat of coming U.S. tariffs on imports from China.

However, there is still a sense of inevitability that the world's second-largest economy will find itself in the firing line, said Kristina Clifton, forex strategist at Commonwealth Bank of Australia.

The threat of tariffs on Chinese goods may be partly a negotiating tactic to cut another deal with China on trade imbalances and fentanyl, she added.

Forex:

A sharp slide in the U.S. dollar in Asia against the likes of the Australian dollar, the New Zealand dollar and the Chinese yuan was sparked by headlines that Trump would rather not have to impose tariffs on China, said Sean Callow, currency analyst at InTouch Capital Markets.

Still, the sustainability of the USD weakness seems open to debate, since very few of those scrambling to dump the USD will have heard the context of Trump's remarks, where he sounded very proud of the tariffs he imposed on China in his first term and complained about the size of the U.S. trade deficit with China last year, Callow added.

Bonds:

European banks are likely to keep up the supply of new euro-denominated covered bonds in the coming week as investor demand remains strong, LBBW said.

The reporting season is, nonetheless, limiting issuance as companies enter the blackout period when they are prohibited from issuing new bonds, it said. "The beginning of the reporting season in the European banking sector is already partially limiting the issuance options," LBBW said.

Energy:

Oil futures fell in Asia after Trump said he wants crude prices to be lower. Speaking at Davos, Trump said he will ask Saudi Arabia and OPEC to bring down the cost of oil, reviving a tactic to talk down prices that the president frequently used during his first term in office, ANZ said.

Ritterbusch sees Trump's energy messages as bearish on balance, "but as long as Trump's proposals continue to be issued in rapid fire, enough confusion over his policies could preclude significant downside followthrough."

Metals:

Gold gained early Friday, underpinned by Trump's call for lower interest rates. The precious metal could remain well supported by several factors, including expectations of continued institutional demand, says Ramy Zeytouni, market analyst at Ramy Zeytouni.

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Copper prices were flat in Asian trading amid diverging cues. Investors continue to assess Trump's tariff threats after he warned of 10% duties on all imports from China earlier this week, ANZ said.

However, copper has escaped the broad selloff across the commodity market amid supply-side issues. The bank noted that major producer Freeport-McMoRan said it missed sales projections and warned that 1Q output would slump due to plant maintenance and setbacks in Indonesia.

TODAY'S TOP HEADLINES

Dollar Weakens, Chinese Shares Rise on Trump's Latest Tariff Remarks

The dollar weakened in Asian trade while shares in China and Hong Kong rose on President Trump's remark that he would rather not impose tariffs on China, suggesting the possibility of a trade deal between the world's two largest economies.

In an interview with Fox News released Thursday evening, Trump spoke about his tariff plan and said "I'd rather not have to use it, but it's a tremendous power over China."

Bank of Japan Resumes Hiking Rates as Economy Strengthens

TOKYO-The Bank of Japan raised interest rates on Friday to the highest level since October 2008, as the economy makes steady progress toward the bank's goal of stable 2% inflation and wage-backed growth.

The Japanese central bank lifted its target for the overnight call rate to 0.5% from 0.25%, making its third rate hike after ending the world's negative interest-rate policy in March. The bank previously raised the policy rate to 0.25% in July and had kept it at that level since.

Trump Says Reducing Energy Prices Will Allow for Lower Interest Rates

President Trump said he expected that steps by his administration to reduce energy prices would make it possible to keep a lid on inflation and bring interest rates down.

"I'd like to see oil prices come down, and when the energy comes down, that's going to knock out a lot of the inflation," he told reporters in the Oval Office on Thursday. "That's going to automatically bring the interest rates down."

Trump Tells Davos: Make Your Product in America-or Pay Tariffs

DAVOS, Switzerland-President Trump and his allies used the World Economic Forum to offer the global elite a warning: He intends to follow through on his "America First" campaign promises, spurning allies in the process if necessary.

"My message to every business in the world is very simple: Come make your product in America and we will give you among the lowest taxes of any nation on Earth," Trump said in a video address from Washington on Thursday, revealing he didn't attend in person because of his inauguration earlier this week. "But if you don't make your product in America, which is your prerogative, then, very simply, you will have to pay a tariff."

Rolls-Royce Gets $9.37 Bln Contract to Supply Nuclear Reactors for U.K. Submarines

Rolls-Royce will manufacture nuclear reactors to power new U.K. submarines under a contract valued approximately 9 billion pounds ($9.37 billion).

U.K. Defense Secretary John Healey is expected to outline the eight-year contract during a visit to Rolls-Royce's manufacturing plant in Derby, England, on Friday, the U.K. Ministry of Defence said.

Russia Brushes Off Trump's Threats on Ukraine

President Trump's initial attempts to lure Russian President Vladimir Putin to the negotiating table on Ukraine have been met with what essentially amounts to a shrug.

"We don't see anything new here," Kremlin spokesman Dmitry Peskov said Thursday, a day after Trump took to Truth Social to warn he would be willing to increase the economic pressure on Moscow after a raft of sanctions were applied following its invasion of Ukraine nearly three years ago.

Canada to Review Amazon Contracts After Quebec Layoffs

OTTAWA-Canada warned Amazon.com Chief Executive Andy Jassy that the federal government is reviewing its business ties with the company's cloud-computing unit following Amazon's decision to shut down its warehouses in Quebec, leading to the layoff of 1,700 workers in the French-speaking province.

In a letter posted on the social-media platform X, Industry Minister Francois-Philippe Champagne asked Jassy to reconsider the decision, which entails shutting down warehouses in Quebec over the next two months and returning to a third-party delivery model.

Rio Tinto Says First-Quarter Iron Ore Shipments Will be Affected by Cyclone

Rio Tinto on Friday said first-quarter iron-ore shipments will be affected by flood damage from a tropical cyclone that lashed northwest Australia, but stuck with its full-year guidance for 2025.

Tropical cyclone Sean brought heavy rain and flooding to parts of the coastline of western Australia's mineral-rich Pilbara region, impacting Rio Tinto's rail and port operations.

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Expected Major Events for Friday

00:01/UK: Jan UK Consumer Confidence Survey

06:00/FIN: Dec PPI

06:00/FIN: Dec Labour force survey, incl unemployment

07:00/DEN: Jan Business tendency survey

07:00/SWE: Dec PPI

07:00/SWE: Dec Labour Force Survey

07:30/HUN: Dec Employment & unemployment

08:00/CZE: Jan Business cycle survey (consumer/business confidence)

08:00/SPN: Dec PPI

08:15/FRA: Jan France Flash PMI

08:30/GER: Jan Germany Flash PMI

09:00/EU: Jan Eurozone Flash PMI

09:00/ICE: Dec PPI

09:30/UK: Jan Flash UK PMI

10:00/LUX: Nov Trade

11:00/UK: Jan CBI Distributive Trades Survey

13:00/POL: Dec Broad money M3

15:59/UKR: Dec PPI

All times in GMT. Powered by Onclusive and Dow Jones.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

01-24-25 0017ET