LONDON: Stock markets and dollar trades diverged Friday as investors assessed the outlook for US President Donald Trump’s sweeping tariffs, which are under scrutiny by US courts.
In the latest turn, a US appeals court on Thursday allowed Trump to temporarily keep his aggressive tariffs in place, a day after the US Court of International Trade barred most of the levies launched since he took office.
That news saw Asian markets reverse gains as analysts warned that legal wrangling could add to volatility and throw uncertainty into trade talks between Washington and other governments.
Hong Kong and Tokyo stocks were down more than one percent each by the close, while Shanghai also sank.
European markets fared better, with London, Paris and Frankfurt all rising near the day’s half-way mark.
“When it comes to global trade right now the only certainty is uncertainty,“ said Derren Nathan, head of equity research at Hargreaves Lansdown.
“Just a day after US courts halted the lion’s share of Trump’s recent tariff increases, judges have temporarily reinstated the new border taxes. Little wonder markets are struggling for direction,“ he added.
The dollar gained against the euro and pound but fell versus the yen.
The Japanese currency strengthened after figures showed May inflation in Tokyo — a barometer for the rest of Japan — came in above forecasts, ramping up expectations the country’s central bank will hike interest rates in July.
Oil prices rose Friday as traders turned their focus to Saturday’s meeting of eight OPEC+ members, which are set to decide production quotas for July.
Elsewhere in Europe, data showed that inflation in Spain dipped below the European Central Bank’s two percent target, bolstering the case for more interest rate cuts in the eurozone.
Investors are also looking ahead to the latest figures for the US Federal Reserve’s preferred inflation measure, the PCE, for signs of the health of the world’s largest economy amid tariffs.
While the tariffs are set to go through the courts — and possibly end up at the Supreme Court — there are expectations the US president will find other means to implement them.
The US Court of International Trade ruling on Wednesday barred most of the tariffs announced since Trump took office, saying that he had overstepped his authority — a decision he labelled “horrible” and said should be “quickly and decisively” reversed.
A separate ruling by a federal district judge in Washington also found some levies unlawful as well, giving the administration 14 days to appeal.
Observers said the latest developments have led to speculation about trade negotiations, including those between the United States and European Union, and a deal it has already struck with Britain.
Meanwhile, US Treasury Secretary Scott Bessent told Fox News that negotiations with China were “a bit stalled” and Trump might need to speak to President Xi Jinping, weeks after the economic superpowers agreed a detente in their trade war.
All three main indices on Wall Street ended slightly higher on Thursday, with sentiment also dented by data showing the US economy contracted in January-March, albeit at a slower pace than first thought.
Disappointing readings on jobless benefits and pending home sales added to the more downbeat mood, with investors also on edge over elevated bond yields and Trump’s plans to ramp up the budget deficit.
