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Wall Street prepares for possible fallout when Trump tariffs against Canada and Mexico are near
The Trump administration has delayed the implementation of new tariffs against Mexico and Canada for a month. The reprieve will end on Tuesday. The U.S. Commerce secretary Howard Lutnick confirmed that the tariffs against Canada and Mexico will take effect on February 2. Donald Trump, however, will decide if the proposed tariff rate of 25% is maintained. Canada exports mainly crude oil, other energy products and cars and car components as part of North American auto manufacturing chains. Mexico exports a variety of goods from the auto and industrial sectors. What top brokerages say about the impact of tariffs on U.S. businesses, the economy and financial markets. Profits and Companies Goldman Sachs estimates that the announcements will reduce their S&P 500 earnings-per-share (EPS) predictions by approximately 2% to 3 %. The company said that every five percentage points increase in U.S. Tariff rates could reduce the EPS between 1% and 2%. Barclays analysts warned last month that tariffs against Canada and Mexico could result in a 2.8% drop in the S&P 500 profit if they were fully implemented. The materials and discretionary sectors are most at risk. Citigroup stated before the announcement that a small shock to import prices in a narrow scenario would likely result in a reduction of 50 basis points in S&P's gross margin. However, a larger tariff could cause margins to shrink by 250 basis points. BlackRock warns that exporters' profit margins could be affected if high inflation rates cause interest rates to rise and a dollar rally reaches its peak in 2022. AUTOMAKERS According to Daniel Roeska of Bernstein, the U.S. automobile industry could be facing an extra cost of $40 billion per year, or an increase of 7% on average for each car. Goldman Sachs estimated that Canada and Mexico accounted for almost one-fifth the value of U.S. automobile consumption and production before the tariffs. RBC analysts wrote in a January 28 note that the surcharges on Mexican imports may prove to be a problem to General Motors and could lead to a shift of production to the U.S. Steelmakers J.P. Morgan has said that European steelmakers who have U.S. supply chains integrated into Mexico, Canada, and Europe, will be directly impacted. Analysts point out that ArcelorMittal and its Finnish counterpart Outokumpu are exposed to Mexican steel and Canadian steel. Acerinox, on the other hand, has a high U.S. production. J.P. Morgan analysts stated in a note dated Feb. 3, that 70% of U.S. aluminium imports come from Canada. SPIRIT J.P. Morgan estimates that around 85% of the consolidated sales of Corona Beer maker Constellation Brands come from imported Mexican beer. Piper Sandler estimates that tariffs could have a negative impact on Constellation's fiscal 2026 earnings by $3.75 to $3.75 a share if they last the full fiscal year. OTHERS BofA Global Research stated on January 29, that tariffs against Mexico could harm appliance distributors like Whirlpool. Builders FirstSource may benefit from tariffs on Canadian imports of lumber in the short term, but this would be offset by a decrease in homebuilder starts. INFLATION- Barclays' strategists say that the tariffs may lift the Fed’s preferred inflation indicator, the personal consumption expenditures index, by 35-40 basis point on an annual basis, over a 12-month period. Goldman Sachs estimated that tariffs would increase the U.S. PCE index by 0.9% if they were implemented. This is excluding volatile products such as energy and food. $1 = 0.9700 euro (Reporting and editing by Sriraj Kalluvila, Shounak Dasgupta, and Johann M Cherian in Bengaluru)
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Ivory Coast's gold production expected to hit record high in this year
Jean-Claude Diplo told a leading industry official that the Ivory Coast is expecting to reach a record gold production this year. The mine Lafigue, which opened in 2024, will be a major contributor. To diversify income sources, the world's biggest cocoa producer wants to develop its neglected mining sector. Lafigue, located 500 km north-east of Abidjan, the commercial capital of West Africa, and operated by Endeavour Mining (a London-listed company), is expected to produce 180,000 to 210,000 ounces gold in 2025. Diplo's term as head of the mining association GPMCI, which ended on Friday evening, stated that Ivory Coast gold production will rise to 62 tons this year, from 58 tons by 2024. In an interview in Abidjan with Diplo, he said that the growth would come from Lafigue's gold mine which was about to enter full production. He also added that heavy investments in another mine will allow the country to boost its output. Diplo predicted that Ivory Coast will soon surpass Mali and Burkina Faso and achieve Ghana's production levels. "We can go very fast... According to our projections, if we remain disciplined as we do today, in 2030 we will be at par with Ghana. Barrick Gold, Perseus Mining, and Roxgold also operate in Ivory Coast. Loucoumane Colibaly is reporting; Anait Miridzhanian and Kirby Donovan are editing.
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JP Morgan expects copper to reach $11,000/mt by 2026; 10% tariffs in late 3Q25
JP Morgan said that it expects global copper deficits to reach 160,000 metric tonnes in 2026. The bank also continues to predict copper prices to average around $11,000 per ton in the next year. The bank expects that a tariff of at least 10% will be implemented on imported refined copper, and products made from copper, by the end of the third quarter. However, there is a risk of an even higher rate, possibly as high as 25%. JP Morgan stated that "likely excess inventories will build in the U.S. over the next few months before a tariff is imposed on copper, leaving the rest of world short of copper... setting up the stage for our bullish push upwards in 2H25 to $10,400/mt." The bank forecasted that China's growth in demand would also slow, from 4% to 2.5%. It added: "This remains the biggest downside risk to our predicted tightening of copper markets." The bank did predict a slight slowdown in the global demand for copper, from 3.2% to 2.9% by 2025. International Copper Study Group's (ICSG) December report shows that the global refined copper market had a deficit of 22,000 metric tons, compared to a deficit of 124,000 metric tons in November. Citi said last week in a report that it expected the implementation of a 25% tariff on copper by the fourth quarter 2025, following Trump's Executive Order. London copper prices rose on Monday due to a lower dollar and improved manufacturing activity in China, the world's largest metal consumer. (Reporting by Rahul Paswan in Bengaluru; Editing by Kevin Liffey)
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EU proposes to give automakers three years for CO2 targets
On Monday, the European Commission gave in to pressure from European carmakers and granted them an extra three years to reach CO2 emissions targets for 2025. Ursula von der Leyen, President of the Commission, told a press conference that the EU executive will make a proposal this month to allow for compliance over three years rather than just one. To meet the targets, European automakers must sell more electric cars. They lag behind their Chinese and U.S. competitors in this segment. "The goals remain the same." "They have to meet the targets but it means that more breathing room for industry," said she, adding that this proposal still requires approval from EU governments as well as the European Parliament. Shares in Volkswagen, BMW and Mercedes-Benz rose after von der Leyen's comments According to industry sources, compliance will be determined by the average for the years 2025-2027. EU automakers, who have been hit by factory closings and are now preparing for U.S. Tariffs, have asked the Commission to grant them relief from fines that could reach 15 billion euros (about $15.7 billion), if their fleets fail to meet the 2025 limits. The EU executive plans to publish its automotive plan on Wednesday, to ensure that EU car manufacturers can electrify and modernize their fleets in order to compete with other advanced competitors like Tesla and Chinese automakers.
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Document shows that Ras Al Khaimah, UAE, has hired banks to issue Islamic bonds
A document published on Monday showed that Ras Al Khaimah - one of the seven city states of the United Arab Emirates - has instructed banks to organize investor meetings before issuing any sukuk or Islamic bonds. Document from one of the banks involved in the meeting said that the government intends to issue benchmark-sized 10-year sukuk after the meetings begin on 3 March, depending on the market conditions. Benchmark size is usually understood as being at least $500,000,000. Citi, Emirates NBD Capital Abu Dhabi Commercial Bank First Abu Dhabi Bank National Bank of Ras Al Khaimah, Standard Chartered and Abu Dhabi Commercial Bank are the joint global coordinators. The proceeds from the planned issue are to be used for budgetary and general government purposes. A bond prospectus revealed that the government had a gross outstanding debt of 3,67 billion dirhams (999.37 millions dollars), with a sukuk maturing in 2025. Wynn Resorts, a hotel and casino operator, is building a luxury resort in the city state, called Wynn Al Marjan Island. Last year, it was awarded the UAE’s first commercial gaming license. The resort is scheduled to open during the first quarter 2027. In 2023, the UAE, which is looking to diversify away from hydrocarbons and focus on other industries, established a new gaming regulatory body, ending the years-long speculation about whether or not the country would permit gambling, which was illegal in the conservative Gulf region. According to a prospectus, Ras Al Khaimah government contributed 2.1 billion dirhams (571.83 millions) to the Wynn joint-venture at the end last year. The company estimates that it will raise an additional 8,8 billion dirhams through debt financing. It also expects to increase its revenue by 1.4 and 1.6 billions dirhams, respectively. Dubai and Abu Dhabi are the UAE's two largest emirates. Both have accelerated their efforts to develop industries such as tourism and manufacturing, and financial services. $1 = 3.6723 UAE Dirham (Reporting and editing by Abinaya Vigyaraghavan, Yousef Sabah)
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Stocks of arms companies soar after the German parties' defense sea change
After reports that the next likely government would be considering a major fiscal overhaul for Europe's largest economy, Europe's defense stocks surged. Shares of defence contractors such as Thyssenkrupp Hensoldt Renk Rheinmetall BAE Systems, Leonardo, and Hensoldt rose by double digits after news broke that the Social Democrats and Conservatives, who won the elections, were considering debt-financed funds for infrastructure and defence worth under one trillion euros. No one has confirmed the existence of a 400 billion euro fund for defense and infrastructure, which could be as high as 500 billion dollars. This would equal 20% of German GDP. Senior officials on both sides spoke of urgent needs. Matthias Miersch, SPD General Secretary, said on Monday that "there is a huge need for investment. We won't be able to create consent if we only invest in defense." "The two must be considered in tandem." The talks are the latest result of the United States' cool attitude towards backing up Europe's defense since President Donald Trump returned the White House. Friday's confrontation between Trump and Ukrainian president Volodymyr Zelenskiy was a dramatic example. In a note, Deutsche Bank stated that even if the money was spent over ten years, it would still be as much as East Germany has invested since reunification. It would be a fiscal system shift of historical proportions. Bild reported that an extra session of the parliament could be called next Monday. This would allow for the measure to pass with the support of the Greens. The Left Party, which is skeptical of defence, will need to be supported in order to achieve the two-thirds requirement. Germany has lagged behind in defence for decades. It will spend less than NATO's 2% target on defence until 2023, despite the Russian invasion of Ukraine, and Chancellor Olaf Scholz’s "Zeitenwende", or sea change, only producing modest results. The use of the special fund, which is essentially a credit line, reflects the difficulty in circumventing the constitutional spending cap. This limit limits the amount that German governments can borrow each year. The stock price explosion reflects investor confidence in the fact that manufacturers of military vehicles, ammunition, and other battlefield equipment will reap the benefits. Scholz's prior attempts to increase military spending relied also on a separate fund, which is formally separated from Germany's public spending of 2 trillion euros. It's a tricky legal situation: A court ruling against the use of another fund led to the fall of his government, and he lost the election last month. The state auditor wants their use to be restricted. Deutsche Bank stated that the economic impact of the Defence Fund would be minimal in the short-term, as much of it will be spent on imported goods. A larger impact would be made by the infrastructure fund. Years of frugal spending have left Germany's public sphere in a poor state. The Deutsche Bank stated that the fiscal stimulus could be worth as much as 2% of GDP if they were spent over a period of 10 years. (Reporting and Editing by FriederikeHeine and Angus MacSwan, $1 = 0.9602 Euros)
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Stocks of arms companies soar after the German parties' defense sea change
After reports that the next likely government in Germany was considering a major fiscal overhaul for Europe's largest economy, Europe's defense stocks surged on Monday. Shares of defence contractors such as Thyssenkrupp Hensoldt Renk Rheinmetall BAE Systems, Leonardo, and Hensoldt rose by double-digits percentages after news broke that the conservatives, who won the elections, and the Social Democrats, centre-left, were considering debt-financed infrastructure and defence funds worth under one trillion euros. No party has confirmed officially that a special defence fund worth 400 billion euro ($417 billion), and infrastructure funds worth up to 500 billion euro, which would total 20% of German GDP were being discussed. In a note, Deutsche Bank stated that even if the money was spent over ten years, it would still be as much as East Germany has invested since reunification. It would be a fiscal system shift of historical proportions. The talks are the latest result of the United States' changing attitude toward Europe's defense since President Donald Trump's return to the White House. Friday's confrontation between Trump and Ukrainian president Volodymyr Zelenskiy provided the most dramatic example. The funds could be approved in the current parliament if the Greens are able to secure the two-thirds needed. The consent of the Left, a defence-skeptic party that will sit in the new parliament later this month is also required. Germany has lagged behind in defence for decades. It will spend less than NATO's 2% target on defence until 2023, despite the Russian invasion of Ukraine, and Chancellor Olaf Scholz’s "Zeitenwende", or sea change, only yielding modest results. The use of the special fund, which is akin to a credit card, reflects the difficulty in avoiding a constitutional cap on spending that limits how much new debt the German government can incur each year. The stock price explosion reflects investor confidence in the fact that manufacturers of military vehicles, ammunition, and other battlefield equipment will reap the benefits. Scholz's earlier attempts to boost Germany's military spending relied also on a separate fund that was formally separated from the 2 trillion euro in public expenditure. Legally, they are tricky: A court ruling against the use of a different fund led to the collapse of the government and the loss of the elections last month. Deutsche Bank stated that the economic impact of the Defence Fund would be minimal in the short-term, as much of the money would be spent on imported goods. The infrastructure fund would have a more significant economic impact. Years of frugal spending have left Germany's public sphere in a poor state. The fiscal stimulus could be worth up 2% of the GDP if they were spent over 10 years and smoothed out. The conservatives and SPD are both open to reforming the debt-brake, which is increasingly seen as a growth-stifling factor. However, any reform will require a two-thirds majority in parliament and the approval of the Greens, as well as the Left, who would want to extract a quid pro-quo. ($1 = 0.9602 euro) (Reporting and Editing by FriederikeHeine and Angus MacSwan).
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US farmers survive the crop-price crisis by grazing sheep under solar panels
The Raines family did not plant any cotton seeds last year for the first time in 4 generations. Chad Raines parked the tractor and rented most of his Texas land to a neighbour. Raines, instead of plowing his fields, spent the entire year transporting his flock to solar farms to eat the grass around the panels. He said that the deals he made with five solar companies for his natural lawn-mowing services were more lucrative than farming cotton. Raines said, "Cotton has been so low for such a long time, I needed to do something else." Some crop producers in the United States are struggling to make ends meet as they struggle with debts that have risen and incomes that have fallen. They're trading their tractors in for flocks and solar grazing business. Farmers are trying to diversify income by switching from sheep-herding to solar. A multi-year slump has been affecting the U.S. agriculture economy, and crop producers have been hit particularly hard. Raines' farm would have suffered a $200,000 deficit if he had grown cotton in the past year. It would also be difficult to make money by raising sheep solely for meat. Raines made a profit in the amount of $300,000 thanks to solar sheep grazing and selling lamb meat to restaurant suppliers. Solar covers all my expenses, including the $2,000 a month I spend on dog food per month for the guard dogs," Raines said, whose son returned to the farm to assist. Such opportunities could slow down. The executive order issued by President Donald Trump, which, among other things ends the clean energy-related funds, could have a future impact on a swath clean energy incentives via the Inflation Reduction Act. As part of Trump's sweeping effort to review all government loans and grants, IRA funding was frozen. A recent court ruling allowed some IRA funding to be unfrozen. However, many groups are still unable to use them. USDA spokesperson: "Farmers and Ranchers shouldn't have to depend on far-left climate programmes for grazing lands or "economic lifelines"," an email statement said. The agency is focused rural prosperity and "putting a halt to spending that doesn't have anything to do with agriculture." BLUES OF THE CROP FARM U.S. Cotton Future Prices have fallen nearly 40% in the last two years as global stockpiles have outweighed global demand. U.S. Department of Agriculture statistics show that U.S. cotton exports have fallen sharply due to Brazilian prices and a decline in Chinese demand. Louis Barbera is a managing partner of VLM Commodities, a cotton broker. He said that the last three years were brutal for Texas cotton farmers. USDA's forecast for early February indicated that while U.S. farm revenue is expected to increase this year, it will be driven by the high price of livestock and the anticipated massive government aid under the American Relief Act 2025. Even if the producers get this aid, their incomes will be at their lowest level since 2010, said Jennifer Ifft an agricultural economist from Kansas State University. According to the Federal Reserve Banks of Kansas City & Minneapolis, farmers who heavily rely on debt for their operations were slower in paying back their loans by 2024. A growing number of them are also selling assets to remain afloat. In an interview, Tait Berg said that income diversification can save the farm in times of ag recessions. These solar land-management agreements can provide a lifeline for farmers who are faced with expensive seed bills or equipment parts to repair their machinery. This is according to more than a dozen farmer interviews. They said that it can be a way to run their farm profitably, instead of trying to find a job to pay their bills in town or to do something else. According to the American Solar Grazing Association, sheep grazed more than 129,000 acre of solar panel sites in the U.S. last October. This compares to only 15,000 acres by 2021. According to the group, between January and Oct. last year, solar-site sheep increased from 80,000 up to over 113,000. The new business opportunity, while only a fraction of the country's 5.05 million total sheep and lamb herds, has allowed the herd to grow for the first since 2016, according to Peter Orwick. NEW OPPORTUNITIES Abigail Ross Hopper is the president and CEO of Solar Energy Industries Association. She said that during President Donald Trump's initial term, the U.S. Solar Industry grew. Development also accelerated after a law passed in 2022 by former President Joe Biden, which provided subsidies for clean-energy projects. She said that the sector is expecting to continue growing under Trump's second tenure. Anna Kelly, White House deputy spokesperson, said in a press release: "President Trump will ultimately cut programs that don't serve the American people but keep programs that place America First." Analysts say that the solar boom in Indiana and Illinois has drawn a lot of twenty- and thirtysomethings who are eager to get into farming without having to take on huge debts to rent land or machinery. Marcus and Jess Gray, from Virginia, put off their plans to plant trees after signing lucrative contracts with Dominion Energy. They now graze 900 head of cattle on 4,000 acres, where solar farms are being constructed. Jess Gray (39), said: "It is a steady income where we can set the price and negotiate it, instead of taking our grain to the local elevators and having them tell us what they are worth." FLEECE on the Rise Once a site has been established, using sheep to clear local flora will result in substantial savings. Reagan Farr is the chief executive of Tennessee-based Silicon Ranch, a solar company. He said that depending on where you are building, initial capital costs can be higher. He said that some locations need wells drilled to provide water or complex gate systems for corrals. Farr stated that the company still saves around 20% on operating costs once a site has been running. Farr explained that the economics of the situation work when you are not hauling water or sheep across country. It's easier and cheaper to pay our sheepherders a living wages than to hire someone who sits on a lawnmower 10 hours per day, every day. Silicon Ranch, a company in which Shell has a stake in, launched its own sheep breeding programme in Georgia in response to the demand for solar-grazing animals. This was done to boost local farmer supplies. Raines' family made the decision based on simple economics. Raines stated, "Our family farm would have been out of business if I had continued row crop farming." Reporting by P.J. Huffstutter, Chicago. Additional reporting by Marcelo Téixeira, New York City. Editing by Simon Webb & Claudia Parsons.
Gold prices rise on dollar weakness and uncertainty over the Ukraine peace deal
Gold prices increased on Monday due to a weaker US dollar. Meanwhile, concerns about the U.S. Tariff Policy and the delay in achieving peace in Ukraine fueled demand for gold as a safe haven.
By 0303 GMT, spot gold had risen 0.3% to an ounce of $2866.76. U.S. Gold Futures rose by 1.1% to $2.880.50.
Dollar index dropped 0.4%, a drop from the two-week-high reached in the previous session. This makes bullion cheaper for holders of other currencies.
The geopolitical risks associated with the reversal of the expected peace agreement between Ukraine and Russia are likely to have driven today's early Asian bullish sentiment in gold, said Kelvin Woong, senior analyst for Asia Pacific at OANDA.
The meeting between Ukrainian President Volodymyr Zelenskiy and U.S. president Donald Trump on Friday ended in disaster, adding to the uncertainty of financial markets already nervous due to weakening data about the economy and volatility surrounding U.S. trading policies.
Howard Lutnick, the U.S. Secretary of Commerce, said that on Sunday tariffs against Canada and Mexico will come into effect starting on Tuesday. Trump would decide whether or not to keep with the planned 25% rate.
Trump announced that he will add an additional 10% tariff to Chinese goods on Tuesday. This would effectively double the 10% duty imposed on 4 February.
The Federal Reserve could delay reducing interest rates until inflation picks up. This is based on data released by the Federal Reserve last Friday.
While bullion can be a hedge to geopolitical unrest, its appeal is diminished in an environment of high interest rates.
Other metals include palladium, which rose 1% and a platinum spot price of $945.45 per ounce.
Analysts said that demand for industrial precious metals such as platinum and palladium would likely drop if the tariffs proposed by Trump's administration on U.S. automobile imports dampens vehicle sales.
Spot silver rose 0.5% to $31.30. (Reporting and editing by Anushree mukherjee in Bengaluru and Anjana Anil; Rashmi aich and Subhranshu sahu).
(source: Reuters)