US stocks rallied on Tuesday, while the dollar gained and oil swung, as traders were hopeful that Donald Trump's early actions as President might signal a less aggressive trade policy.
Investors were fearful that tariffs would be part of the President's day-one agenda. Instead he directed several departments to investigate the US annual trade deficits in goods "and recommend appropriate measures, such as a global supplemental tariff or other policies, to remedy such deficits".
The blue-chip Dow Jones Industrial Average climbed 1.24 per cent - or 537.98 - when trading closed at 2am UAE time. The S&P 500 rose 0.88 per cent while the Nasdaq Composite climbed by 0.64 per cent.
Asian stock indexes trimmed early gains, as the Shanghai Composite Index was down 0.05 per cent when trading closed. Japan’s Nikkei 225 Index moved 0.32 per cent higher while Hong Kong's Hang Seng rose 0.91 per cent. Australia’s S&P/ASX 200 climbed 0.66 per cent as India’s BSE Sensex stock gauge declined 1.60 per cent.
Meanwhile, the FTSE 100 was trading marginally higher, CAC 40 Index futures in France rose 0.39 per cent and DAX 30 Index futures in Germany advanced 0.12 per cent.
Mr Trump refrained from imposing higher tariffs upon immediately on returning to office, but previewed possible actions to come. Among them was a threat to implement a 100 per cent tariff on Brics nations if they continue de-dollarisation efforts. He also told reporters he is considering a 25 per cent tariff on goods from Mexico and Canada as soon as February 1.
“Both countries have said that they would retaliate in the event of tariffs, risking a trade war between the members of the US-Mexico-Canada Agreement," Daniel Richards, Emirates NBD's Mena economist said on Tuesday
Mr Trump also said he could impose a 100 per cent tariff on Chinese goods if Beijing does not approve a potential sale of TikTok. But when asked about the prospect of universal tariffs, Mr Trump responded, "We're not ready for that yet".
Investors had remained on tenterhooks in the lead-up to Mr Trump’s second White House stint, as they waited for promised executive orders to enforce the President's “America First” agenda, which could affect global trade flows and the balance in energy markets.
On Monday, Mr Trump declared a “national energy emergency” and withdrew the US from the Paris Climate Agreement as he moved to reverse former president Joe Biden's climate legacy.
The energy emergency declaration was signed to increase domestic oil and gas production in a bid to lower costs for consumers.
“We will be a rich nation again, and it is that liquid gold under our feet that will help to do it,” Mr Trump said during his inaugural address.
Oil swung between gains and losses on Tuesday morning, with Brent, the benchmark for two thirds of the world’s oil, trading flat at $80.06 a barrel, while West Texas Intermediate, the gauge that tracks US crude, was down 0.67 per cent at $77.36 a barrel.
“Nearly all the measures [so far by Trump Administration] that are directly or indirectly material for the oil markets are slow-burn and may prompt a knee-jerk reaction in crude futures, but do not clearly translate into an immediate bullish or bearish sentiment,” Vanda Insights, a Singapore-based global energy market intelligence provider, said in its note to investors.
The dollar on Tuesday also rebounded in Asia trade amid bets that expansionary policies of Mr Trump and his plans to impose tariffs would force the Federal Reserve to halt further interest rate cuts.
Bloomberg’s dollar gauge rose as much as 0.7 per cent in Asia after slumping in New York trade on Monday when Mr Trump did not immediately imposed sweeping tariffs on Canada and Mexico. Currencies of the two nations fell more than 1 per cent against the greenback before paring the move, according to Bloomberg data.
