- Dollar Advances, Stocks Tumble on Trump Tariffs: Markets Wrap
The dollar surged while equity markets and digital currencies plunged after US President Donald Trump made
good on his threat to impose tariffs on imports from Canada, Mexico and China. European and US stock
futures slumped, while an index of Asia-Pacific shares dropped the most in nearly six months in response to
the punitive measures taken against some of America’s biggest trading partners. Fears the action will stoke
price pressures also spurred a rise in the yields on two-year US Treasuries. The selloff ricocheted across asset
classes on Monday, with traders responding by slashing positions in a range of tokens that had benefitted
from Trump’s pro-crypto statements. The euro extended its decline after Trump said tariffs on EU goods
would “definitely happen.” The rapid escalation in tensions constitutes the most extensive act of
protectionism taken by a US president in almost a century, given its knock-on effect on everything from
inflation to geopolitics and economic growth. Trump said he plans talks on Monday with Canada and Mexico
ahead of the tariffs coming into force. - Dow closes 300 points lower Friday as White House says tariffs will start Saturday
The S&P 500 slid Friday following news that President Donald Trump’s aggressive tariffs against major U.S.
trading partners would begin on Saturday. The broad market index shed 0.50% to close at 6,040.53, while the
Dow Jones Industrial Average tumbled 337.47 points, or 0.75%, weighed down by a decline in Chevron. The
30-stock Dow ended the session at 44,544.66. The tech-heavy Nasdaq Composite slipped 0.28% to 19,627.44.
After tumbling 3.07% on Monday, the Nasdaq Composite ended Friday with a weekly loss of 1.6%. The S&P
500 and blue-chip Dow finished the week 1% lower and 0.3% higher, respectively. Nvidia, which plunged
nearly 17% on Monday, posted a weekly loss of roughly 16%. - Oil set for weekly losses as U.S. set to impose tariffs on Canada, Mexico
Oil prices eased on Friday and closed the week lower as investors awaited 25% tariffs by the United States on
Canada and Mexico, expected on Saturday. Brent crude futures for March, which expire on Friday, settled
down 11 cents at $76.76 a barrel. The more actively traded second month futures were down 31 cents, at
$75.58. U.S. West Texas Intermediate crude closed down 20 cents, or 0.3%, at $72.53. For the week, the
Brent and WTI benchmarks lost 2.1% and 2.9%, respectively, and marked the second straight week of losses.
Trump will include a process for Canada and Mexico to seek specific exemptions for certain imports, sources
had told Reuters, adding that new tariffs would become effective on March 1. But the White House
said Saturday’s deadline holds and that there was no update on exemptions for certain imports. Crude
futures continue to drift as traders await the outcome of Trump’s tariff threats, said Dennis Kissler, senior
vice president of trading at BOK Financial. Canadian crude is used by many U.S. Midwest refineries and a
curtailed flow will likely support fuel prices, he added. Canada and Mexico are the two largest crude oil
exporters to the United States, but it is unclear if oil would be included among the tariffs. Trump said on
Thursday he would soon decide whether to exclude oil imports from the tariffs. Tariffs would likely result in
large U.S. refinery run cuts, said Energy Aspects analyst Livia Gallarati. - Gold surges past $2,800 as tariff threats reignite record rally
Gold prices surpassed the key $2,800 mark for the first time ever on Friday, fuelled by a rush to safety on U.S.
President Donald Trump’s tariff threats, which heightened concerns about global economic growth and
inflationary pressures. Spot gold rose 0.6% to $2,810.55 per ounce, after hitting a record high of $2,817.23
earlier in the session. U.S. gold futures were little changed at $2,822.90, trading at a premium to spot gold
rates. - Germany’s inflation steady at 2.8% in January ahead of February election
German inflation was unchanged year-on-year at 2.8% in January, preliminary data from the country’s
statistics office Destatis showed Friday in the last reading before Germans head to the polls next month.
The reading was also in line with a forecast from economists polled by Reuters. The print is harmonized
across the euro area for comparability. On a monthly basis, the harmonized consumer price index fell by
0.2%. Germany’s inflation rate has now stayed above the European Central Bank’s 2% target for the fourth
month in a row, after falling below that threshold in September last year. This roughly mirrors the
development of re-accelerating inflation in the wider euro area. The European Central Bank on Thursday said
that disinflation in the bloc “is well on track” and has broadly developed in line with staff projections.
Euro area inflation came in at 2.4% in December. The January figures are slated for release next week.
Friday’s data showed that German core inflation, which strips out food and energy prices, was at 2.9% in
January, down markedly from the 3.3% print of December. Services inflation also eased slightly, coming in at
4% in January compared to December’s 4.1%. Germany’s weak economy appears to be having a
disinflationary effect, Sebastian Becker, economist at Deutsche Bank Research, said in a note on Friday.
Preliminary data released Thursday showed that Germany’s economy contracted by 0.2% in the fourth
quarter of last year, which was more than expected. - Trump says Americans could feel ‘pain’ in trade war with Mexico, Canada and China
President Donald Trump said on Sunday the sweeping tariffs that he has imposed
on Mexico, Canada and China may cause “short-term” pain for Americans as global markets reflected
concerns the levies could undermine growth and reignite inflation. Trump said he would talk on Monday with
the leaders of Canada and Mexico, which have announced retaliatory tariffs of their own, but downplayed
expectations that they would change his mind. “I don’t expect anything dramatic,” Trump told reporters as
he returned to Washington from his Mar-a-Lago estate in Florida. “They owe us a lot of money, and I’m sure
they’re going to pay.” He also said tariffs would “definitely happen” with the European Union, but did not say
when. Critics say the Republican president’s plan to impose 25% tariffs on Canada and Mexico and 10% tariffs
on China will slow global growth and drive prices higher for Americans. Trump says they are needed to curb
immigration and narcotics trafficking and spur domestic industries. - China’s January factory growth misses expectations as exports decline ahead of U.S. tariffs, Caixin PMI
shows
China’s factory activity slowed in January as export orders dwindled ahead of additional U.S. tariffs that are
set to come into effect Tuesday, a private-sector survey showed Monday. The seasonally adjusted Caixin/S&P
Global manufacturing purchasing manager’s index came in at 50.1 in January, missing Reuters poll forecast of
50.5. Manufacturing PMI stayed above the 50 level that separates expansion from contraction for a fourth
straight month, but it nudged down from 50.5 in December, 51.5 in November and 50.3 in October. The
private survey reading follows the official PMI data in January that showed activity unexpectedly contracted
to 49.1, after expanding for three straight months, reinforcing calls for more stimulus to spur growth. Reuters
had forecast PMI to come in at 50.1. Domestic demand improved in January while new export orders fell for
a second straight month, as overseas demand for consumer goods declined, according to the survey. The
employment sub-index also slumped to the lowest level in nearly five years, as businesses remained cautious
amid economic uncertainty. Shipment orders have started to soften after exporters rushed to front-load
them toward the end of last year, Lynn Song, chief China economist at LNG told CNBC. “This side is likely to
remain under pressure in the coming months, particularly if the U.S. tariffs do indeed come into effect on
Feb. 4.” Domestic orders will need to “play a larger role in driving manufacturing in 2025, as we can see
tariffs are starting to take effect,” he added. U.S. President Donald Trump on Saturday signed executive
orders to impose 10% tariffs on Chinese goods — 25% on Mexican and most Canadian imports — starting
Tuesday. On his first day in office last month, Trump ordered his administration to investigate Beijing’s
compliance with a trade deal struck during his first presidency. - Rupee Set to Extend Slump to Record Lows on India Rate-Cut Bets
The Indian rupee is expected to weaken further against the dollar, after hitting a new low Monday, as traders
bet on interest-rate cuts amid signs the central bank is loosening its grip on the currency under its new chief.
The Reserve Bank of India will reduce the repurchase rate by 25 basis points Friday, the first easing since the
pandemic, a Bloomberg survey of economists showed. That will add to pressure on the currency after
US tariffs rattled Asian markets. - Key Fed measure shows core inflation at 2.8%, in line with expectations
Inflation closed out 2024 on a strong note, as a price gauge the Federal Reserve focuses on came in well
above the central bank’s target, the Commerce Department reported Friday. The personal consumption
expenditures price index increased 2.6% on a year-over-year basis in December, 0.2 percentage point higher
than the November reading and in line with the Dow Jones estimate. Excluding food and energy, core PCE
registered a 2.8% reading, also meeting expectations and the same as the prior month. Though the Fed
considers both readings, historically officials have seen core as the better gauge of long-run inflation. On a
monthly basis, headline PCE rose 0.3% while core increased 0.2%, both in line with forecasts as well. The Fed
targets annual inflation at 2%, a level the price gauge has not seen since February 2021. - Bitcoin slides toward $90,000 after Trump orders tariffs
Cryptocurrencies tumbled on Sunday in a risk-off move after President Donald Trump hit Canada, Mexico and
China with long-threatened import tariffs. The price of bitcoin was last lower by 7% at $93,768.66, according
to Coin Metrics. The CoinDesk 20 index, which measures the largest 20 digital assets by market cap, dropped
19%. Ether slumped 20% to its lowest level since November. The slide began Saturday night after Trump
signed an order imposing 25% tariffs on imports from Mexico and Canada, as well as a 10% duty on China,
which will take effect Tuesday. The U.S. does about $1.6 trillion in business with the three countries.
Jeff Park, Bitwise Asset Management’s head of alpha strategies, said a sustained tariff war will be “amazing”
for bitcoin in the long-run due to an eventual weakening of the dollar and U.S. rates. While many believe
bitcoin is a hedge against inflation and uncertainty over the long term, it trades like a risk asset in the short
term — and is likely to respond negatively to any uncertainty around the trade war triggered by Trump’s
tariffs. Investors are watching $90,000 as the key support level in bitcoin, and some have warned of an even
deeper pullback toward $80,000 should the cryptocurrency meaningfully break below its support.
Bitcoin is about 16% off its Jan. 20 record of $109,350.72. Seasoned crypto investors and traders have
become accustomed over the years to corrections of around 30% during bull markets. - ‘It doesn’t have to be this way’: Canada, Mexico, China and the EU respond to Trump’s tariffs
Trump on Saturday signed an order imposing 25% tariffs on Mexico and Canada, as well as a 10% duty on
China. In response, Canadian Prime Minister Justin Trudeau announced retaliatory tariffs of 25% against $155
billion of U.S. goods. Mexico also vowed retaliation, although President Claudia Sheinbaum did not reveal
specifics. China, meanwhile, stopped short of an immediate escalation. While not specifically targeted, trade
tensions already simmering with the EU prompted it to weigh in on the Trump tariffs. - Novartis AG said profit will rise this year as new medicines help offset competition from copycats of its
best-selling drug, an optimistic forecast that boosted the stock
Shares rose 1.9%. Core operating profit will likely grow by a high single- to a low double-digit percentage,
outpacing sales, the drugmaker said. Sales will probably increase at a mid- to high-single digit pace this year.
The drugmaker reported a 7% increase in fourth-quarter net income to $2.8 billion. Both earnings and sales
beat analysts’ estimates. The results “add on to a continuous streak where Novartis beats their own and the
market’s expectations,” Stefan Schneider, an analyst at Vontobel, wrote in a note. “This should help to close
the gap between Novartis mid-term growth guidance that is clearly above the market’s
expectations.” Novartis is facing patent expiries for three key drugs, with top-selling heart medicine Entresto
expected to face generic competitors in the US mid-year. Besides Entresto, Tasigna for leukemia and
Promacta for a blood disorder, will face generics in the US. But they have successors: The company
anticipates more than 15 regulatory submissions or approvals for key drugs this year. - AbbVie shares rose 4.7% after it forecast 2025 earnings above Wall Street’s average expectation as two
key medicines gained ground
The drugmaker is relying on newer treatments to make up for falling sales of Humira, its aging blockbuster
that now faces lower-price competition. AbbVie increased revenue expectations for Skyrizi and Rinvoq, a pair
of drugs for autoimmune disorders, to more than $31 billion in combined sales in 2027. Adjusted earnings
will be $12.12 to $12.32 a share in 2025, Abbvie said. The midpoint is above Wall Street analysts’ average
estimate of $12.13. Bloomberg Intelligence: AbbVie was previously driven by one core product, Humira,
that’s now been replaced by two — Skyrizi and Rinvoq — with the incremental profitability likely to result in
2025 guidance being exceeded. The latter two are combining to smooth over quarterly earnings cracks such
as the 4Q shortfall in Humira and Aesthetics, for example. Pressure has been growing on Skyrizi and Rinvoq to
drive sales after a schizophrenia drug Abbvie acquired in its $8.7 billion buyout of Cerevel Therapeutics
Inc. failed in clinical trials. Total sales for the quarter beat analysts’ expectations as revenue from the new
treatments soared to bring in more than $5.6 billion combined. With no other major drugs losing patent
protection until the mid-2030s, capacity for more deals and upside from the new drugs, “we see AbbVie as
well positioned,” JPMorgan analyst Christopher Schott said. Humira sales were $1.7 billion in the quarter,
down by half from the same period a year earlier. Sales in the division that markets skin aesthetic treatments
Botox and Juvederm fell 5.2%, hurt by consumer spending trends in the US and China, AbbVie said. - Exxon shares slipped 2.5% as Wall Street analysts said the oil and gas producer beat fourth-quarter
earnings thanks to one-time items
TD Cowen, Jason Gabelman (buy; PT $128): Notes that earnings per share without one-time items that
boosted results “would have been $0.04/sh below” consensus estimates. Piper Sandler, Ryan Todd
(overweight; PT $127): Exxon “delivered a solid 4Q beat” but the reaction in the shares are likely to be
“tempered somewhat” because the results include a roughly $800-million favorable tax impact. FOURTH
QUARTER RESULTS: Adjusted EPS $1.67 vs. $1.92 y/y, estimate $1.55. Total revenues & other income $83.43
billion, estimate $83.71 billion. Production 4,602 KOEBD, estimate 4,640. YEAR FORECAST: Still sees Net Cash
Capex $27 billion to $29 billion. - Chevron shares fell 4.6% after the oil and gas producer’s fourth-quarter earnings per share missed Wall
Street expectations as its downstream business delivered a surprise loss
Piper Sandler, Ryan Todd (overweight; PT $173): Earnings miss “driven by weaker than expected downstream
and corporate” results. “The weakness is likely overstated slightly” by $515 million in non-recurring
problems. BMO Capital Markets, Phillip Jungwirth (outperform; PT $175): Says recent divestitures, major
project ramp ups and cost reduction drives production and free cash flow growth, “supporting a strong
buyback pace into 2025”. FOURTH QUARTER RESULTS: Adjusted EPS $2.06 vs. $3.45 y/y, estimate $2.11.
Upstream earnings $4.30 billion vs. $1.59 billion y/y, estimate $4.02 billion. Downstream loss $248 million vs.
profit $1.15 billion y/y, estimate profit $215.4 million. Worldwide production 3,350 mboe/d, -1.2% y/y,
estimate 3,324. Revenue & other income $52.23 billion, estimate $45.77 billion. - Atlassian shares surged 14.9% after the software company reported second-quarter results that beat
expectations and raised its full-year forecast
Morgan Stanley (overweight): Growth in cloud and data center segments “well exceeded” investors’
expectations, analyst Keith Weiss says. “With building momentum in the Atlassian business, rising recognition
of the company’s strong positioning for the Agentic Computing opportunity should enable some further
multiple expansion against our forecast”. PT raised $370 from $315. Bloomberg Intelligence: The results and
outlook “signal improving execution, customer loyalty and share gains against point-solutions rivals”. The
strong cloud revenue growth “could quell concerns on IT spending momentum and improve sentiment”.
SECOND QUARTER RESULTS: Adjusted EPS 96c vs. 73c y/y, estimate 75c. Revenue $1.29 billion, +21% y/y,
estimate $1.24 billion. Adjusted gross margin 85% vs. 84% y/y, estimate 84%. Adjusted operating margin 26%
vs. 24% y/y, estimate 21.3%. YEAR FORECAST: Sees revenue +18.5% to +19%, saw +16.5% to +17%. Sees
adjusted gross margin 84% to 84.5%, estimate 83.6%. Sees adjusted operating margin 23.5%, saw 22% to
22.5%, estimate 22.5%. - Colgate-Palmolive shares fell 4.6% after the household and personal-care products company reported
fourth-quarter organic sales growth that trailed Wall Street expectations
Barclays, equal weight: “Though it has been expected that organic sales growth would slow as the benefit
from pricing, particularly in Latin America, faded, this was a stronger & faster dynamic than anticipated,”
analyst Lauren Lieberman writes. Calls out the organic sales growth miss for Hill’s in particular. Also flags the
gross margin miss, saying that with recent headlines on Mexico tariffs, “we worry there is incremental
pressure to come on this front in 2025”. Stifel, hold: Weaker organic sales growth and lower-than-expected
gross margin are disappointing, though initial 2025 profit guidance is “modestly better than feared,
particularly given anticipated mid-single-digit FX headwinds,” analyst Mark Astrachan writes. FOURTH
QUARTER RESULTS: Adjusted EPS 91c vs. 87c y/y, estimate 89c. Net sales $4.94 billion, -0.1% y/y, estimate
$4.97 billion. Organic sales +4.3%, estimate +5.85%. Pricing +1.8%, estimate +2.7%. YEAR FORECAST: Sees
organic sales +3% to +5%, estimate +4.41%. Sees base business EPS up low to mid-single-digits. - ResMed stock drops despite earnings beat
Shares of ResMed (NYSE:RMD) fell 8% on Friday, despite the company reporting second-quarter earnings that
surpassed analyst expectations. The medical equipment maker posted earnings per share (EPS) of $2.43,
which was $0.11 higher than the analyst estimate of $2.32. Revenue for the quarter reached $1.28 billion,
exceeding the consensus estimate of $1.27 billion. The decline in stock value comes as analysts express mixed
views on the company’s quarterly performance. While ResMed achieved a 10% revenue increase compared
to the same quarter last year, some market observers remain cautious due to external factors that could
affect the company’s future growth. ResMed’s second-quarter results, released on January 30, 2025,
demonstrated strong financial health, with a 10% year-over-year (YoY) increase in revenue and a significant
improvement in gross margin by 300 basis points to 58.6%. The non-GAAP gross margin also saw a rise of 230
basis points to 59.2%. The company’s income from operations surged by 52%, and non-GAAP income from
operations grew by 19%. The company’s CEO, Mick Farrell, attributed the robust performance to heightened
demand for ResMed’s sleep health and breathing health products, as well as its digital health solutions. He
also noted the company’s focus on operational excellence and the positive impact of consumer wearables
that track sleep health, along with the use of GLP-1 therapies.
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