By Amanda Cooper and Koh Gui Qing
LONDON/NEW YORK (Reuters) – Global stocks steadied on Thursday, as a rally fueled by President Donald Trump’s spending plans for artificial intelligence infrastructure fizzled and caution set in over what the new U.S. president’s next moves on trade might be.
In a sign of policies to come, Trump told business leaders at the World Economic Forum in Davos, Switzerland, on Thursday that he wants to lower global oil prices, interest rates and taxes, and warned they will face tariffs if they make their products abroad.
“I’ll demand that interest rates drop immediately. And likewise, they should be dropping all over the world,” Trump said via video conference on Thursday.
Investors are most nervous right now about Trump’s possible plans for imposing tariffs. With no new details available, the uncertainty weighed on equity markets while Treasury yields rose for a second day, as bond investors braced for an eventual imposition of tariffs that may stoke inflation. [US/]
“President Trump’s policies are creating the perfect storm of inflationary pressures,” said Nigel Green, CEO of deVere Group, a financial advisory firm, adding that another buildup in price pressures could cause the Federal Reserve to raise interest rates.
“The Fed may have no choice but to act. This could trigger significant market volatility,” Green said.
The MSCI index for global stocks edged up 0.3%, while U.S. stocks were mixed. The S&P 500 rose 0.3%, the Dow Jones Industrial Average added 0.8% and the Nasdaq Composite was little changed.
The U.S. 10-year Treasury yield climbed 4.7 basis points to 4.6456%, below last week’s 14-month high of 4.809%. [US/]
“Obviously, it’s early days … We have seen no surprises (from Trump) so far,” said Guy Miller, chief markets strategist at Zurich Insurance Group (OTC:ZFSVF).
“If anything, some restraint was shown. So that has allowed the financial markets to reprice to some extent, allowing bond yields to come back in again and risk assets to move higher,” he said.
In Europe, the STOXX 600, which hit a record high on Wednesday, edged up 0.4%, as some selling pressure abated on technology shares, which had soared after Trump announced a $500 billion private-sector AI infrastructure investment plan.
The joint venture, which involves Oracle (NYSE:ORCL), OpenAI and SoftBank (TYO:9984), initially turbo-charged a rally in global stock markets, which drew further support from upbeat earnings.
On Asian markets overnight, Japan’s Nikkei gained 0.8%. Shares of SoftBank jumped 5%.
In China, the government announced plans to channel hundreds of billions of yuan of investment from state-owned insurers into shares, just after Trump said he was proposing to slap a 10% punitive duty on Chinese imports.
The CSI300 blue-chip index ended the day up 0.18%, while the yuan weakened against the dollar to 7.289 in offshore trading.
TARIFF THREATS
Action (WA:ACT) in currency markets was largely subdued after a volatile few sessions since Trump’s return to the White House, driven by his pronouncements on tariffs early in the week.
Trump has said he plans to impose duties on imports from Mexico and Canada from Feb. 1 and has said he will apply tariffs on imports from the European Union.
In the absence of further specifics, the dollar struggled to push higher and Thursday’s data fed in to the idea among traders that the Federal Reserve may have more room to lower rates this year.
The U.S. dollar index, which measures the currency against six others, languished near a two-week low of 108.07.
The euro was steady at $1.0427, as was sterling at $1.236.
“The threat of tariffs continues to hang over markets, but the rapidly declining half life of headlines shows you the market is already numb to the shenanigans,” said Brent Donnelly, president at Spectra Markets.
Ahead of the Bank of Japan’s policy decision on Friday, the dollar rose to a one-week high against the yen at 156.19 before retreating to 155.91. Markets have already fully priced in a 25-basis-point rate hike at the conclusion of the meeting.
Oil prices remained below $80 a barrel, under pressure after Trump said he will be asking Saudi Arabia and OPEC to bring down the cost of oil. Investors are also worried about how Trump’s proposed tariffs could affect global economic growth and demand for energy.
Brent crude futures were last down 0.9% on the day at $78.32 a barrel.