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Stocks and the euro rise on Trump EU tariff delays

The global markets rose on Monday, and the euro also rallied. This was after U.S. president Donald Trump pushed back his threat to impose 50% tariffs on European Union products until July. It is another temporary reprieve in trade policy.

The broadest MSCI index of world stocks rose by 0.2%. The pan-European stock index, which last rose.9%, has recovered to its previous trading level before Trump unexpectedly announced on Friday that he would impose 50% tariffs on European products, claiming that negotiations with the region were too slow.

Trump changed his mind on Sunday and pushed the deadline for tariffs from June 1 to July 9, after European Commission President Ursula von der Leyen stated that the 27-nation EU needed more time to reach a deal.

Investors were reminded by Trump's recent policy moves how quickly things can change. Analysts point out that investors have moved their money from U.S. to Europe and Asia in anticipation of a possible U.S. economic recession and the resulting global slowdown.

Commerzbank stated in a statement that Trump's comments on Friday were a reminder about his unpredictable policies and decisions.

SEB Research said that a "toxic cocktail" was now being mixed in the U.S., consisting of (1) a rising risk premium for holding U.S. assets (2) global investors moving towards portfolio diversification and (3) a greater focus on the homeland. They also predicted the dollar would lose value, while U.S. rates might rise.

EURO GAINS

Dollar fell by 0.1% on Monday against a basket currency. The euro rose 0.23%, to $1.1380. This is its highest level since late April. Meanwhile, the pound increased by almost 0.2% to 1.3567.

Christopher Wong is the currency strategist for OCBC.

The policy uncertainty surrounding Trump's Tariffs, and of course the erosion of U.S. exceptionalalism could still potentially undermine sentiment and confidence in the medium-term.

Due to the fact that markets in America and Britain were closed on Monday due to public holidays, trading volumes are expected to be lower than normal.

The ballooning debt levels of developed economies have also been brought to the forefront following Moody's downgrade in credit ratings for the United States, and the weak auctions held in the U.S.A. and Japan in the last week.

This week, Japan and Germany will release their inflation reports along with data on the prices of U.S. goods.

China and Hong Kong closed Monday's trading lower as Apple suppliers and automobile shares fell on concerns about a price war.

The Shanghai Composite index fell 0.1% at the close while the blue-chip CSI300 Index dropped 0.6%.

After Trump seemed to approve of Nippon Steel’s acquisition of U.S. Steel, the Nikkei 225 index closed 1% higher in Japan. This was its biggest one-day gain in nearly two weeks.

After a week of record-breaking super-long yields, Japanese government bonds have also surged.

Investors will focus on super-long Japanese bonds, and inflation data is expected to be released later this week. They are trying to gauge Bank of Japan’s monetary policy outlook.

Brent crude and U.S. oil prices fell 23 cents each to $64.54 a barrel and $61.28 a barrel, respectively. Gold also slipped from its two-week peak of $3,339 per ounce.

(source: Reuters)