Daily Summary: Markets Digest Tariffs Delay

US Markets Under Pressure: Wall Street indices declined as traders digested new tariff announcements, with the S&P 500 falling 0.7%, the Nasdaq 100 down 0.8%, and the Dow Jones Industrial Average slipping 0.2%. The "Magnificent Seven" megacaps lost 1.7%, while the Russell 2000 dropped 1.2%.

European Indices Hit By Trade Concerns: European markets saw broad declines, with Germany's DE40 leading losses (-1.05%), followed by France's FRA40 (-1.05%) and the pan-European EU50 (-1.02%). The UK's UK100 showed relative resilience, down 0.88%, while Italy's ITA40 fell 0.42%.

Mexico Tariffs Delayed: President Trump agreed to postpone 25% tariffs on Mexico for one month following talks with President Claudia Sheinbaum. Mexico committed to deploying 10,000 additional troops to the US border, while negotiations will continue under Secretary of State Marco Rubio, Treasury Secretary Scott Bessent, and Commerce Secretary nominee Howard Lutnick.

Canada Negotiations Continue: US-Canada trade tensions remain high as 25% tariffs (10% on oil) are set to take effect Tuesday. Prime Minister Trudeau and President Trump held initial talks Monday morning with a follow-up scheduled for 3 p.m. ET. Canada has announced retaliatory 25% tariffs affecting approximately $107 billion of US goods.

Gold Hits Historic High: The precious metal touched a new record of $2,830.74 per ounce before moderating to $2,816.75, gaining 0.7% as investors sought safe-haven assets amid trade tensions. Bank of Montreal analysts suggest the tariffs create "strong tailwind for gold" through both inflationary effects and potential de-dollarization plans.

Natural Gas Surges on Supply Concerns: US natural gas futures jumped 9.38% to $3.348 per mmBtu, driven by forecasts for colder weather and worries about Canadian supplies following Trump's tariff announcement. About 9% of US gas consumption came from Canada in 2024.

Manufacturing Shows Surprise Strength: The ISM Manufacturing PMI rose to 50.9 in January from 49.3, marking the first expansion after 26 months of contraction. S&P Global Manufacturing PMI similarly increased to 51.2 from 49.4, both exceeding analyst expectations.

LNG Exports Near Record: US LNG exports reached 8.46 million metric tonnes in January, just shy of the 8.6 MT record set in December 2023. Europe received 86% of January's exports as cold weather drove up demand and prices.

Wall Street Warnings: Goldman Sachs strategists warn of potential 5% market correction if tariffs persist, projecting 2-3% earnings impact. RBC Capital Markets sees increased risk of a 5-10% drawdown, while Morgan Stanley notes markets have been "sanguine" about tariff risks.

Hedge Funds vs Retail Split: Institutional investors dumped US equities for a fifth straight week according to Goldman Sachs data, while retail traders poured $2.1 billion into stocks on Friday alone – one of only nine such large daily inflows in three years.

Currency Markets React: The Mexican peso rallied 1% after the tariff delay announcement, while the Canadian dollar fell 0.3%. The Bloomberg Dollar Spot Index rose 0.2%, moderating from earlier gains of up to 1.3%.

Bond Market Signals: Treasury yields remained relatively stable with the 10-year yield declining two basis points to 4.52%, as traders weighed trade tensions against manufacturing data strength. The yield curve showed signs of further inversion.

Crypto Markets Mixed: Despite early morning pressure, Bitcoin showed resilience by climbing 2% to $99,660, approaching the $100,000 mark. However, Ethereum declined 5% to $2,725, while Solana demonstrated strength with a 3.5% gain to $209. The divergent performance comes ahead of tomorrow's crypto policy press conference with David Sacks, President Trump's Crypto Czar, and key Senate and House committee chairs.

US Launches Sovereign Wealth Fund: President Trump signed an executive order directing the Treasury and Commerce Departments to establish the nation's first sovereign wealth fund. The announcement indicates the fund may consider acquiring TikTok, which faces a potential ban unless its Chinese owner ByteDance sells the platform. The move represents a significant shift in US economic policy and follows Trump's January executive order on digital financial technology leadership.