LONDON: The euro gained in early trading as European leaders scramble to secure Ukraine amid concerns of an American pullback.
Asian stocks were set for a mixed start as President Donald Trump prepares to slap long-promised tariffs on Canada and Mexico, while increasing a levy on China.
The common currency rose 0.3% against the US dollar, outperforming major peers and paring some of last week’s loss. The Polish zloty and Romanian leu also gained.
“Plans for the European countries to take more responsibility for funding the war in Ukraine and upping defence spending” should be euro positive, said Dane Cekov, a senior macro and foreign-exchange strategist at Sparebank 1 Markets AS.
“Still, we expect the US dollar to continue on a strong note as the introduction of tariffs continues to include more countries and sectors in the months to come.”
Markets are starting the week with another geopolitical one-two punch as European leaders pledge to increase defence spending and assemble what Britain called a “coalition of the willing” to secure Ukraine.
That follows a fiery Oval Office clash between Trump and Ukrainian Prime Minister Volodymyr Zelenskiy over the prospects of a ceasefire with Russia without American security guarantees.
Traders are also awaiting news of any last minute negotiations to avoid US trade tariffs on Mexican and Canadian goods, as well as a further 10% tax on Chinese imports, that are due to come into effect this week.
“For now, geopolitics mainly contribute to the flood of news and uncertainty that leave investors hesitant about deploying capital or increasing risk in their portfolios,” said Raphael Thuin, head of capital market strategies at Tikehau Capital.
“And there are indications that this uncertainty is beginning to affect the real economy, reinforcing the prevailing climate of caution.”
Bitcoin rallied last Sunday after President Donald Trump talked up his plan for a strategic crypto reserve, which includes XRP and ADA tokens.
The move recoups some of February’s 18% loss, its worst since June 2022.
The S&P 500 increased 1.6% last Friday while Treasuries extended February’s rally, with two-year yields dropping below 4% after data showed US inflation isn’t heating up.
In Asia this week, traders’ hopes are running high that a ramp-up in fiscal spending will be announced at China’s National People’s Congress (NPC) to bolster domestic demand, offsetting the risk of US tariffs and sustain this year’s blistering rally.
The Chinese yuan has strengthened about 0.6% this year while a gauge of the nation’s equities has jumped more than 12%, almost five times the gain of a gauge of global stocks, according to data compiled by Bloomberg.
“Counter to the negative this week is the anticipated positive messaging from China’s Chinese People’s Political Consultative Conference and the NPC meeting,” said Wee Khoon Chong, a senior strategist at BNY.
“We are reasonably confident the artificial intelligence-driven optimism and momentum in Hang Seng is here to stay in the near-term, but a period of consolidation is warranted following the record year-to-date gains.”
Elsewhere, growth data in Australia as well as inflation readings in Latin America are due this week.
The European Central Bank will give a policy decision after inflation readings in France and Italy last week supported the case for further cuts. — Bloomberg
