Graphic: Take Five: Big Trump tariffs are here

MAG Silver

03/02/2025 07:44

(Updates story first published on Friday to reflect weekend
tariff news.)
       Feb 3 (Reuters) - U.S. President Donald Trump's sweeping
tariffs on Mexico, Canada and China over the weekend, impending
U.S. jobs data and assessment of the new AI landscape ahead of
major tech firms' corporate results set the tone for financial
markets.
    The Bank of England has an interest rate decision, and
European lenders will also publish their results. 
    Here's your guide to the week ahead in global markets from
Kevin Buckland in Tokyo, Saqib Ahmed and Lewis Krauskopf in New
York, and Tommy Wilkes and Amanda Cooper in London.
      
    1/T DAY 
    From bond investors and currency traders to Fed officials
and foreign powers, everybody is evaluating the potential
fallout of Trump's tariffs. 
    Trump on Saturday imposed 25% tariffs on Mexican and most
Canadian imports and 10% on goods from China starting on
Tuesday.
    Canada has said it would respond with 25% tariffs against
$155 billion of U.S. goods. Mexico has also said it plans
retaliatory tariffs and China has vowed countermeasures.
    The response from the world's second biggest economy will be
in focus for markets as China returns this week from Lunar New
Year festivities. 
    And in Europe, investors are reassessing the view that
heightened trade tensions could be avoided.
     

    2/SHOULD I STAY OR SHOULD I GO?
    The monthly U.S. jobs report on Feb. 7 comes as investors
assess the prospects for further interest rate cuts and how
dramatic new Trump administration policies could reshape the
labour market. 
    December's blowout jobs report raised doubts about whether
the Fed would have room to ease monetary policy further and sent
Treasury yields shooting higher. Encouraging inflation data did
calm market fears, but a hot January jobs report could change
all that.
    Fed Chair Jerome Powell said he was in no rush to cut rates
again until inflation and jobs data make it appropriate.
    The big unknown though is Trump's labour market agenda,
including an immigration crackdown and plans to slash the
federal workforce, with the White House offering 2 million
federal employees financial incentives to quit. 
    
    
    3/TECH-TONIC SHIFTS
    Investors have long speculated about what might eventually
slow the AI-investment steamroller and now have a new
perspective to consider: The emergence of China AI sensation
DeepSeek, which has overturned assumptions about the computing
power and investment needed to create state-of-the-art models.
    This shift pummelled Nvidia's stock, inflicting a record
loss in market value. But DeepSeek is also challenging the
broader dominance of U.S. technology, raising questions about
the competitive advantages of the top seven tech stocks, dubbed
the Magnificent Seven.
    With upcoming earnings reports from Mag 7 members Alphabet
 GOOGL.O  on Tuesday and Amazon  AMZN.O  on Thursday, investors
will have the chance to determine whether recent AI market
volatility is a warning of future challenges or an opportunity
to reinvest in this rapidly growing sector.
    
    4/IN FOR A SQUEEZE
    European bank earnings pick up pace this week, with French
lenders BNP Paribas  BNPP.PA , Societe Generale  SOGN.PA  and
Credit Agricole  CAGA.PA , Switzerland's UBS  UBSG.S  and
Spain's Santander  SAN.MC  all reporting fourth-quarter numbers.
    Most lenders are expected to have still wrung enough extra
cash out of higher interest rates - helped by soaring investment
banking revenues - to boost their profits and keep a
two-year-long share price rally rolling on. Investors will
listen for any hints that a recent burst of deal-making has
further to run.
    Still, challenges loom. Falling interest rates mean pressure
on the difference between what banks earn on loans and what they
pay on deposits, and there is economic weakness at home just as
the U.S. economy powers ahead.
    Germany's Deutsche Bank  DBKGn.DE  gave some cause for
concern when it reported a sharp drop in profits and ditched a
key goal on costs, sending its shares lower. 
    
    5/DECISION TIME 
    The Bank of England meets on Thursday to set interest rates.
Markets aren't quite fully pricing in a quarter-point cut, but
economists seem to think that is the likely outcome. 
    UK data is weakening - multiple measures of employment show
cracks appearing in the labour market, and consumer spending
unexpectedly shrank in the key holiday shopping period. Growth
flatlined in the third quarter of 2024 and the BoE expects the
same in the last one. 
    Several banks see the British economy struggling to expand
by even 1% this year, in spite of finance minister Rachel
Reeves' plans to revitalise growth. 
    And there's the matter of the bond market turmoil earlier
this month, which pushed the government's 10-year borrowing
costs to their highest since 2008. Gilt yields have since
retreated, but remain uncomfortably above 4.5% - more than any
G10 economy bar New Zealand. 
    

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
America's biggest trade partners face a nervy wait as Trump
tariffs loom    https://reut.rs/3WvnvE2
Eyes on first US jobs report in 2025 after Fed paused rate cuts 
  https://reut.rs/3PYvo1a
The Magnificent Seven versus the market    https://reut.rs/3CxtSQM
European banks outperform    https://reut.rs/4hDBC2C
Bank of England expected to cut at least twice this year    https://reut.rs/4hcn61R
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Graphics credits to Sumanta Sen, Vineet Sachdev, Prinz
Magtulis and Kripa Jayaram, Additional reporting by Dhara
Ranasinghe ; Compiled by Karin Strohecker; Editing by Frances
Kerry and Bernadette Baum)