Yen Strength and Tariff Threats Pressure Japanese Automakers

Japanese automaker shares fell sharply as tariff threats from US President-elect Donald Trump weighed on investor sentiment, compounded by a stronger yen hurting export prospects. In contrast, Chinese markets showed resilience, with investors banking on Beijing’s ability to counter trade risks with stimulus, while the yuan remains near recent lows. European stock futures suggested a mixed opening, with flat signals for the UK FTSE but weakness expected in Germany’s DAX and the STOXX 50.

Equities

The FTSE 100 slipped 0.4% on Tuesday, pulling back from a one-month high reached earlier this week, as investors reacted to US President-elect Donald Trump’s proposed tariffs targeting Canada, Mexico, and China. The mid-cap FTSE 250 fell more sharply, dropping 0.9% after hitting a near one-month high on Monday.

Mining giants were among the hardest hit in the UK, with Glencore and Rio Tinto falling 2.8% and 1.8%, respectively, as copper prices weakened following tariff concerns affecting China, a major consumer of metals. Spirits maker Diageo dropped 1.6%, reflecting broader pressure on European distillers and brewers amid worries about export risks.

In contrast, Melrose Industries surged 7.7% after J.P. Morgan raised its price target on the aerospace parts manufacturer, citing the stock as significantly undervalued. Halfords saw a 13% jump after it outperformed first-half profit expectations and announced plans to expand its Fusion motoring services across nearly double the number of locations.

In the US, the S&P 500 climbed 0.57% to 6,021.63, supported by a cautious yet supportive tone in the Federal Reserve’s meeting minutes. The Nasdaq gained 0.63% to reach 19,174.30, while the Dow Jones rose 0.28% to 44,860.31.

Among US stocks, the broader market appeared steady, although attention centred on the impact of Trump’s tariff threats. Treasury yields edged higher, with the benchmark 10-year note yield increasing to 4.293%, reflecting diminished optimism over further Federal Reserve rate cuts.

Cryptocurrencies remained under pressure, with Bitcoin sliding 2.8% to $91,064.35 after recently hitting record highs.

Forex & Commodities

The US dollar steadied against major currencies, consolidating gains after President-elect Donald Trump's tariff proposals left markets on edge. The greenback strengthened 0.15% against the Canadian dollar to C$1.40755 after reaching a 4.5-year high of C$1.4178 the previous day. Against the Mexican peso, it rose 0.3%, while the dollar index eased 0.07% to 106.83 ahead of US inflation data expected to influence Federal Reserve policy.

The New Zealand dollar rose 0.5% to $0.58635 after the Reserve Bank of New Zealand cut interest rates by 50 basis points to 4.25%, noting inflation near its target range midpoint. Meanwhile, the Japanese yen climbed 0.47% to 152.37 per dollar on safe-haven demand and expectations of a possible December rate hike in Japan. The euro dipped 0.10% to $1.0479, while the British pound held steady at $1.2570.

Gold prices rose slightly, with spot gold up 0.3% to $2,639.30 per ounce as the softer dollar increased its appeal. US gold futures climbed 0.7% to the same level.

Oil prices eased, with US crude down 0.25% at $68.77 a barrel following a ceasefire agreement between Israel and Lebanon, which reduced geopolitical risks.