Stocks rise tracking tariffs, inflation and earnings ~ EconomyLens.com

London (AFP) – Stock markets mostly rose Tuesday with traders’ attention fixed on President-elect Donald Trump’s tariff plans, earnings updates, and upcoming inflation data. European indices were higher nearing the half-way stage and following big gains for Chinese markets. A report suggesting Trump could slowly hike import tariffs provided support and put a cap on the dollar’s latest surge. However, traders remain concerned that his pledges to cut taxes, regulations, and immigration continue to dampen sentiment with warnings that the measures will revive inflation.

Traders have slashed their expectations on how many times the Federal Reserve will cut interest rates through 2025 to one, while there is talk that the next move could even be a hike owing to still-sticky inflation and Trump concerns. US and UK inflation data is due Wednesday. “With rate expectations now the driving force behind market moves, key inflation data midweek will continue to shape the narrative for the early parts of 2025,” noted Matt Britzman, senior equity analyst at Hargreaves Lansdown.

Data on Friday showing the world’s top economy created far more US jobs than forecast in December dealt yet another blow to the chances of another reduction at the Fed’s next meeting and sent equity markets deep into the red. Wall Street staged a small recovery Monday, with the Dow and S&P ending in positive territory, but tech titans including big-hitter Nvidia dragged the Nasdaq down again.

Hong Kong and Shanghai rallied Tuesday as China’s securities regulator said it was looking at ways to provide more stability to markets after another run of poor performances sparked by worries over the world number two economy and Trump’s threatened tariffs. Tokyo slid, having been shut Monday and with traders there playing catch up with the start of the week’s global losses.

– Dollar mixed –

The dollar traded mixed against major peers Tuesday after Bloomberg reported that members of the US president-elect’s team were looking at a gradual increase in tariffs to boost their negotiating hand and tamper inflationary pressures. Traders were spooked when he said soon after his re-election that he would impose huge levies on China, Canada, and Mexico as soon as he took office. The pound remained stuck close to levels not seen since the end of 2023. The euro was near its weakest since late 2022, with fears it could return to parity with the dollar.

The yen edged up against the greenback as the yield of Japan’s 40-year government bond hit its highest since being launched in 2007, with debate returning to whether the country’s central bank will hike interest rates at next week’s policy meeting. Eyes were also on earnings. In London, shares in retailer JD Sports slumped 8.2 percent after it warned on profits. Energy giant BP shed 2.3 percent on a weak trading update, capping gains on the benchmark FTSE 100 index.

On the upside, Paris was lifted by rising share prices of French banks. “This earnings season will set the tone for financial stocks in 2025, but the stakes are high,” said Charu Chanana, chief investment strategist at Saxo Markets. “Even with solid fourth-quarter results, the macro backdrop — characterised by lingering inflation concerns, steeper yields, and recalibrated Fed expectations — may weigh on sentiment.”