The dollar rallied on Tuesday after plunging the previous day and stocks rose as Donald Trump's return to the White House brought mixed messaging on tariffs and highlighted markets' twitchiness about trade policy.
The Canadian dollar and Mexican peso bore the brunt of the market swings on Tuesday and Monday, after Trump said he was mulling imposing 25% tariffs on the neighbouring countries as soon as Feb. 1.
That sent the Mexican peso sliding well over 1% against the US dollar while the Canadian dollar tumbled to a five-year low of $0.689, although the selloff later moderated somewhat .
Around 11 hours earlier the US dollar had plunged against its peers - including the Canadian dollar and peso - after a presidential memo said the administration would probe trade issues but stop short of day-one tariffs.
US stocks climbed in early trading as markets reopened after Monday's public holiday, with the S&P 500 index up 0.47%, the Nasdaq rising 0.45% and the Dow Jones gaining 0.44%.
US equities were likely reflecting relief among investors that Trump has not kicked off his second presidency with a raft of trade actions, as they reopened after a public holiday, said Jan Von Gerich, chief strategist at lender Nordea.
"We shouldn't get too carried away by this, the fact that he didn't start with tariffs doesn't mean that they won't come later," he said. "For the global equity market, I think it's all about Trump now." European shares were muted after Asia eked out small gains overnight, with investors and governments breathing a sigh of relief that Trump avoided clear moves on tariffs on the European Union and China.
Europe's continent-wide STOXX 600 index was 0.16% higher and Germany's DAX was up 0.08%.
The dollar index, which measures the currency against six peers, was last up 0.3% at 108.31 on Tuesday.
It had earlier risen to 108.79 although failed to make back the 1.2% it lost on Monday in its biggest daily fall since November 2023.
The euro fell 0.26% to $1.039, after jumping 1.42% a day earlier.
Many investors and foreign capitals had expected tariffs to be among the raft of executive orders Trump signed in his first day in office.
The dollar has risen around 5% since Trump won the Nov. 5 election, partly as investors have braced for wide-ranging levies that would likely hurt America's trading partners.
US 10-year Treasury yields were down 4 basis points on Tuesday at 4.57%.
They were nonetheless still up around a percentage point since the Federal Reserve started cutting rates in mid-September, reflecting a strong economy and dwindling prospects for large Fed reductions this year.
Chinese stocks ended higher as Trump largely steered clear of definitive threats against the country's exports, although he warned he could impose tariffs if Beijing failed to approve a US deal to be a half-owner of short-video app TikTok's US business.
"It's part of a transactional methodology," said Timothy Graf, head of macro strategy for EMEA at State Street.
"It's better news than just slapping 60% or 100% tariffs on something, but something is going to be coming, I would think." China's CSI 300 index rose 0.08% overnight while Japan's Nikkei 225 climbed 0.32%.
Oil prices fell on Tuesday as investors assessed Trump's plans to boost US energy production, as well as the delay on tariffs.
Brent crude was down 1.8% at $78.76 a barrel, while US WTI crude was 2.73% lower at $75.75 a barrel.
European shares were subdued on Tuesday, as rising financials and healthcare shares countered broader losses stemming from uncertainty related to US President Donald Trump's proposed tariff measures following his inauguration.
The pan-European STOXX 600 was up 0.1% as of 0954 GMT, hovering near its highest in three months.
Heavyweight healthcare led the gains with a 0.7% rise, with drugmaker Novo Nordisk advancing 2.9%.
Financial services gained 0.5%, boosted by a 4.5% jump in abrdn after the British asset manager swung to net inflows in the fourth quarter.
Personal and household goods was also among the top winning sectors, adding 0.6%.
Markets around the globe reacted to the beginning of Donald Trump's presidency. He did not immediately impose any tariffs when he took office on Monday, but said he was thinking about imposing 25% duties on imports from Canada and Mexico on Feb. 1.
Trump also revealed his plans to reverse the US trade deficit with the European Union, either with tariffs or more energy exports.
European automakers came under pressure. Shares of Volkswagen, BMW and Stellantis slipped about 1% each on uncertainty over possible new tariffs.
Basic resources dipped 0.8%, tracking lower metal prices.
"Market is clearly on edge at this point about what comes next," said Chris Beauchamp, chief market analyst at IG Group, adding that there is a sense that this administration will "take a hard line on tariffs, but implementation of course takes a while." The European Union's senior financial officials said that Trump's return to the White House is a wake-up call for EU countries to fix their economies and become more competitive.
This comes at a time when Trump's tariff-related rhetoric has ignited possibilities of a global trade war.
Among other stocks, Orsted tumbled 15.2% after the offshore wind developer posted an impairment charge of 12.1 billion Danish crowns ($1.69 billion) related to its US offshore portfolio.
Other wind power stocks including Vestas Wind Systems and Nordex SE fell about 2.6% each after Trump suspended new federal offshore wind leasing pending an environmental and economic review.
Agencies