Wall Street joins the sell-off
Ding ding rings the Wall Street opening bell, to signal the start of trading in New York.
And stocks are sliding, as investors react to the imposition of tariffs on Canada, Mexico and China by the US.
The Dow Jones industrial average, of 30 large US companies, is down 1.26% at the start of trading, falling by 561 points to 43,982 points.
The broader S&P 500 index fell by over 1.6%, as stocks are roiled by Donald Trump’s tariffs.
The tech-focused Nasdaq index has dropped by 1.9%, while the Russell 2000 index of small US companies has dropped by 2.4% at the open.
Fawad Razaqzada, market analyst at City Index, says investors are defensive:
Overall, risk-off trade has dominated in the first half of Monday’s session, following Trump’s trade tariff announcements.
With tariffs against Canada and Mexico set to start tomorrow, there’s not much time for a potential trade deal to be struck, but the fact we have seen a bit of an uptick in US futures and with the US dollar coming off its earlier highs, investors are probably anticipating some positive news to come out of all of this.
Key events
And finally….
With European stock markets closed, and Wall Street off its earlier lows, we’ll give the final word today to ABN Amro.
They have told clients that the “Year of the tariff” has kicked off with a bang. And even though Mexico has won a (temporary?) reprieve from new tariffs today, the threat of tariff s will linger.
As ABN AMRO’s analysts put it:
US tariff threats against Mexico and Canada raises risk of massive trade war – President Trump’s ‘will he, won’t he’ threats of a 25% tariff on goods from Mexico and Canada (alongside a 10% additional tariff on Chinese goods) have significantly raised the probability of a more economically damaging trade war between the US and its main trade partners.
The situation remains fluid, with the latest word from Mexican president Sheinbaum suggesting a one month delay to tariff rises (previously scheduled for tomorrow) – at least for Mexico. But Trump himself has taken a hard line, saying “they owe us a lot of money, and I’m sure they’re going to pay.” Even if tariffs don’t go ahead in the near term, the risk will probably remain.
Trump has also sought to prepare the public for the massive disruption that is likely to result from tariffs, acknowledging that “we may have short term some little pain.” This would come from three main channels: 1) Canada and Mexico have vowed a massive retaliation, with Canada announcing a 25% tariff on $155bn of US goods, 2) higher US inflation (see below), 3) US companies with complex cross-border supply chains, such as auto makers, which may see a compounding effect of tariffs where goods cross borders multiple times.
As ‘painful’ as all of this may be, Trump’s comments suggest a high bar for him to permanently climb down from tariffs. If anything, as we describe below, there might be a lower bar for him to expand his trade war.
I guess we’ll find out in the weeks, days, and hours ahead.
And to keep track of developments in the short-term, our US Politics Live blog has all the action:
Goodnight. GW
The detente between the US and Mexico is also calming fears on Wall Street.
The Dow Jones industrial average is now down just 0.1%, while the broader S&P 500 share index is 0.5% lower today.
European stock markets have also closed in the red tonight.
Germanys DAX was down 1.5% at the closing bell, while France’s CAC lost 1.3%.
Auto stocks were among the fallers, on fears of fresh tariffs on European carmarkets.
After a choppy day’s trading, the London stock market has closed in the red – but above its earlier lows.
The blue-chip FTSE 100 share index has ended the day down 90 points at 8583 points, a drop of 1% from last week’s record high.
That’s its biggest one-day drop since 19th December. The Footsie had been on track for its worst day in four months, before the US delayed its tariffs on Mexico for a month.
The smaller FTSE 250 index also recovered some of its earlier losses, to end the day down 1.14%.
The rally in the oil price has reversed too!
US crude, which had jumped 2% this morning, is now flat at $72.60 per barrel, while Brent crude is down 0.2%.
Elsewhere in the markets today, US hedge fund Saba has received a bloody nose in its battle to shake up the UK’s investment trust sector.
Shareholders in two more trusts rejected proposals from Saba, which is trying to oust the entire boards of seven trusts.
Investors in Baillie Gifford US Growth Trust rejected eight resolutions submitted by Saba to oust several of its board members, with 66% of votes cast voting against them.
Shareholders in Keystone Positive Change trust also rejected similar Saba proposals, with 72% of votes cast against.
That follows a heavy defeat for Saba at Herald, the tech-focused FTSE 250 fund, whose investors rebuffed the fund last month.
The euro is also recovering some of its earlier losses against the US dollar.
Having fallen by a cent and a half this morning to $1.0212, the euro has recovered to $1.0314, down less than half a cent.
Peso recovering in relief rally
Mexico’s peso has come bouncing back, on relief that the 25% tariffs at the US border have been delayed by a month.
Having hit a near three-year low this morning, the peso has recovered all those losses and is now stronger against the US dollar today.
The peso is now up 0.5% at 20.58 to the dollar.
Trump says he held off on tariffs after Mexico agreed to deploy troops to border
Donald Trump has now confirmed that his administration will hold off on imposing tariffs on Mexico for one month.
The reprieve coes, he sas, after Claudia Sheinbaum’s government agreed to deploy troops to its border with the United States.
Here’s Trump’s full statement, from Truth Social:
I just spoke with President Claudia Sheinbaum of Mexico. It was a very friendly conversation wherein she agreed to immediately supply 10,000 Mexican Soldiers on the Border separating Mexico and the United States. These soldiers will be specifically designated to stop the flow of fentanyl, and illegal migrants into our Country. We further agreed to immediately pause the anticipated tariffs for a one month period during which we will have negotiations headed by Secretary of State Marco Rubio, Secretary of Treasury Scott Bessent, and Secretary of Commerce Howard Lutnick, and high-level Representatives of Mexico. I look forward to participating in those negotiations, with President Sheinbaum, as we attempt to achieve a “deal” between our two Countries.
Our US Politics Live blog has all the action:
The UK stock market is recovering some of its earlier losses too, after the tariffs on Mexico are delayed by a month.
The FTSE 100 index is now down 92 points, or 1%, at 8581 points, having been down over 1.2% earlier today.
The pound has rallied against the US dollar too, and is now slightly up against the greenback today at $1.24 (having been down by over a cent earlier).
Mexico: US tariffs have been delayed for a month
Newsflash: Mexico’s president has announced that the tariffs anounced by the US last weekend have been paused for a month.
Claudia Sheinbaum Pardo has said she has had a good conversation with president Trump, and agreed that Mexico will deploy 10,000 national guard immeidatley to border to avoid trafficking of drugs to the US, Reuters reports.
Sheinbaum also says the US has committed to working to avoid the trafficking of high powered weapons to Mexico, and that teams from the two countries have. started to work today on security and business.
BREAKING: Mexico President says that the US has agreed to “pause” the 25% tariffs on the southern neighbor for a month. More talks on security and trade to follow | #OOTT
— Javier Blas (@JavierBlas) February 3, 2025
This will come as a relief to investors, as well as Mexican companies facing tariffs at the border (and US consumers who may have faced higher prices in response).
Wall Street has responded – the Dow Jones industrial average has recovered some of its earlier losses, and is now down 0.5% or 238 points at 44,306.
Canada is expected to divert aluminium to Europe once US tariffs kick in.
Reuters reports:
The cost of aluminium for consumers in Europe buying on the physical market has dropped due to expectations that Canadian shipments under U.S. tariffs from Tuesday will be diverted, physical market traders said.
U.S. President Donald Trump has imposed 25% tariffs on Mexican and most Canadian imports and 10% on goods from China starting on Tuesday, potentially kicking off a trade war that could dent global growth and reignite inflation.
The risk appetite in the markets has turned sour by the new US tariffs, but there is hope they could be short lived.
So says Kathleen Brooks, research director at XTB, who adds:
There are some steep declines in line for US stocks. Nearly all sectors on the S&P 500 are in the red, except for energy, which has been buoyed by the oil price rise.
Chip stocks and autos are the worst effected sectors on the S&P 500 so far, followed by transport and banks. Autos, transport and semiconductors are directly impacted by tariffs, banks less so. The sell off in US banking stocks is reflective of residual concerns about the impact on US and global growth and the rising chance of a recession.
If Elon Musk takes a break from gutting the foreign aid agency USAid, he’ll see that shares in his electric car company are sliding.
Tesla’s stock is down 4.8%, making it one of the top fallers on the Nasdaq.
Nvidia, Nike and Goldman Sachs lead Dow fallers
Chip giant Nvidia are the top faller on the Dow Jones industrial average, down 5.2% in early trading.
Its followed by Nike (-2.6%) and Goldman Sachs (-2.4%).
Only five of the 30 stocks on the DJIA are up in early trading, including Unitedhealth Group (+1.3%), Amgen (+0.8%) and Procter & Gamble (+0.5%).
Wall Street joins the sell-off
Ding ding rings the Wall Street opening bell, to signal the start of trading in New York.
And stocks are sliding, as investors react to the imposition of tariffs on Canada, Mexico and China by the US.
The Dow Jones industrial average, of 30 large US companies, is down 1.26% at the start of trading, falling by 561 points to 43,982 points.
The broader S&P 500 index fell by over 1.6%, as stocks are roiled by Donald Trump’s tariffs.
The tech-focused Nasdaq index has dropped by 1.9%, while the Russell 2000 index of small US companies has dropped by 2.4% at the open.
Fawad Razaqzada, market analyst at City Index, says investors are defensive:
Overall, risk-off trade has dominated in the first half of Monday’s session, following Trump’s trade tariff announcements.
With tariffs against Canada and Mexico set to start tomorrow, there’s not much time for a potential trade deal to be struck, but the fact we have seen a bit of an uptick in US futures and with the US dollar coming off its earlier highs, investors are probably anticipating some positive news to come out of all of this.
Analysts at Bank of America have predicted that the tariff imposed on Mexico and Canada might prove to be temporary.
They suggest the tariffs could be lifted once the US, Canada, and Mexico trade agreement (USMCA) is reviewed – due to take place in 2026, but could happen earlier.
They told clients:
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We expect 25% tariffs to Canada and Mexico may be short-lived, but 10% tariffs to China to be permanent.
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Lower growth and higher inflation across the board. Fed on hold, Canada/China have room for policy stimulus, Mexico does not.
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25% tariffs lingering for longer is a possibility: Mexico would not escape a recession, although Canada might.
Ontario premier ‘ripping up contract’ with Musk’s Starlink
The leader of Ontario, Canada’s most populous province, has announced he’s ripping up a contract with Elon Musk’s Starlink internet services in response to the sweeping tariffs on Canada announced by Donald Trump last weekend.
Ontario Premier Doug Ford also declared he is banning American companies from provincial contracts in the province until US tariffs are removed.
Ford posted on X:
Every year, the Ontario government and its agencies spend $30 billion on procurement, alongside our $200 billion plan to build Ontario. U.S.-based businesses will now lose out on tens of billions of dollars in new revenues. They only have President Trump to blame.
We’re going one step further. We’ll be ripping up the province’s contract with Starlink. Ontario won’t do business with people hellbent on destroying our economy.
Starting today and until U.S. tariffs are removed, Ontario is banning American companies from provincial contracts.
Every year, the Ontario government and its agencies spend $30 billion on procurement, alongside our $200 billion plan to build Ontario. U.S.-based businesses will…
— Doug Ford (@fordnation) February 3, 2025
