Global markets saw turbulent sessions following Donald Trump’s inauguration on Monday and early Tuesday, reacting sharply to comments about Trump’s tariff plans, with asset classes including stocks, currencies, commodities, and cryptocurrencies showing significant volatility.
Global markets faced a rollercoaster of volatility as major asset classes swung sharply during Donald Trump’s first day in office. Investor sentiment was dominated by the US President’s potential implementation of the tariff pledges made during his campaign.
On Monday, European stock markets closed broadly higher after Trump’s team signalled that the initial executive orders might exclude tariffs on goods from China, Canada, and Mexico. US stock markets were closed for a public holiday, but the three main futures indices all posted gains. The US dollar sharply retreated, pushing the euro to a two-week high above 1.04. Bitcoin briefly surged to a new record high of over $109,000 before retreating, while gold prices climbed higher and oil declined.
However, nearly all trends reversed during Tuesday’s Asian session. President Trump announced plans to impose previously pledged tariffs of 25% on imports from Canada and Mexico starting on 1 February. The announcement sent shockwaves through the markets, with the greenback regaining strength and pressuring other currencies, including the euro. US equity futures declined, setting the stage for potential spillovers into European markets.
Prevailing Risk-Aversion Sentiment
Investors are increasingly turning to safe-haven assets to hedge against uncertainty, as sentiment appears highly sensitive to Trump’s policy shifts. “The fact we’ve seen such positive reactions to signals of a more deliberative approach to tariffs shows how concerned the markets are about the impact of trade wars. Further, the volatility seen today shows that sentiment can change in an instant,” said Kyle Rodda, a senior financial market analyst at Compital.com.
Early on Tuesday in the Asian session, traditional safe-haven assets such as gold and the Japanese yen surged. At 4:25 a.m. European Central Time (ECT), spot gold prices rose 0.72% to $2,725 per ounce, the highest level since election day on 5 November. The USD/JPY pair fell below 155 for the first time since 19 December. Meanwhile, the euro pared some of its earlier gains against the dollar, retreating to just below 1.04.
However, the greenback may maintain its strength as a haven asset. “For the dollar, uncertainties surrounding tariff policies and potential trade frictions are likely to bolster its safe-haven appeal”, Dilin Wu, a research strategist wrote in an email to Euronews. “Gold continues to benefit from safe-haven demand, maintaining its upward trajectory”, she added.
Bitcoin Retreats from a New High
Bitcoin reached a new record high of over $109,000 following Trump’s inauguration on Monday, surpassing its previous peak of $108,300. However, the surge was short-lived due to a lack of clarity on cryptocurrency policy from the new administration. By 4:50 a.m. ECT, Bitcoin had rebounded from a session low near $100,000 to approximately $103,000. “Until regulatory policies and supportive measures become clearer, Bitcoin traders may remain on the sidelines”, said Wu.
Previously, President Trump had announced plans to establish a US Bitcoin Reserve and ease industrial regulations. Over the weekend, both Trump and his wife unveiled their own meme coins – Official Trump and Melania Meme – on the Solana blockchain. Solana and the meme coins rallied before pulling back on Saturday. Despite the volatility, crypto enthusiasts remain optimistic that Trump will introduce pro-crypto policies within his first 100 days in office.
Crude Oil Under Pressure
Crude oil prices fell for a third consecutive trading day on Monday as Trump declared his intention to “declare a national energy emergency” to ramp up US production and reverse climate-focused policies implemented during the Biden administration. “We will be a rich nation again, and it is that liquid gold under our feet that will help us to do it”, Trump stated.
Oil prices saw a modest rebound in the Asian session, with WTI futures rising 0.65% to $76.89 per barrel and Brent futures climbing to $80.20 per barrel.
The oil market had surged to a six-month high last week, supported by additional sanctions on Russian exports imposed by the Biden administration and stronger-than-expected economic data from China.
However, the outlook for oil prices remains uncertain as Trump has pledged to end the war between Ukraine and Russia. His approach could involve either tightening sanctions on Russia or relaxing restrictions to facilitate negotiations, each of which could have adverse impact on crude prices.
