Gold prices surged to a record high, the dollar held firm, and stocks remained subdued on Tuesday as investors prepared for further changes in U.S. trade policy and awaited remarks from Federal Reserve Chair Jerome Powell on tariffs and inflation.
Oil prices maintained a sharp rebound, with Brent crude futures staying above $76 per barrel. European equity futures were flat, while FTSE futures also showed little movement, and U.S. stock futures dipped by 0.2%.
On Monday, Trump raised tariffs on steel and aluminum imports to 25%, causing U.S. steelmakers’ share prices to rise, and pledged to announce global reciprocal tariffs soon.
However, he also suggested he might offer an exemption for Australia following a conversation with the country’s Prime Minister, which seemed to confirm investor assumptions that negotiations are still possible.
Meanwhile, retaliatory Chinese tariffs on U.S. energy and other goods took effect on Monday. Despite this, the Hang Seng Index hit a four-month high as investors remained hopeful for a deal. While it was down about 0.4% at the close, the Hang Seng has gained more than 12% in the past month, fueled by enthusiasm for AI and chip stocks.
Mainland Chinese stock indexes saw modest declines.
“Trump is a businessman at heart, so deals are always possible,” said Prashant Bhayani, Chief Investment Officer for Asia at BNP Paribas Wealth Management. “That’s why the market has been measured in its response.”
In Hong Kong, electric vehicle stocks were among the biggest movers. BYD’s shares hit a record high after the company introduced free smart driving features on most models, including the Seagull, which costs just $9,555. However, shares in other companies in the sector saw significant drops.
Gold reached a record high of just above $2,942 per ounce, up 63% from its October 23, 2023 low of $1,809.50.
“The surge in gold reflects a combination of ongoing central bank buying to diversify away from the dollar, demand for safe-haven assets, and positive momentum attracting more buyers,” said Shane Oliver, Head of Investment Strategy at AMP in Sydney.
Currency Markets
In forex trading, the Chinese yuan weakened past the 7.3 per dollar mark, trading at 7.3042 on Tuesday. The Australian dollar remained steady at $0.6278.
Against the Japanese yen, the dollar was stable at 152.01 yen, and at $1.03 per euro.
The Canadian dollar and Mexican peso declined, as both countries faced the brunt of Trump’s metal tariffs.
Federal Reserve Chair Jerome Powell was scheduled to speak on Tuesday before the Senate Banking, Housing and Urban Affairs Committee for his semiannual monetary policy testimony. His comments on tariffs and inflation are expected to be closely watched.
The benchmark 10-year U.S. Treasury yield closed at 4.495%, but remained unchanged during the Asia session due to a public holiday in Japan. Traders largely ignored Trump’s recent remarks questioning U.S. government debt figures.
“The markets will likely want more details on what this could mean,” said Mark Elworthy, Head of Fixed Income, Currency, and Commodity Trading at Bank of America in Australia, referencing Trump’s comments on U.S. debt. “I’m only speculating, but it will be interesting to see if more comes of this in the coming days.”
