Dollar steady and stocks climb with all eyes on Trump 2.0

By Harry Robertson and Koh Gui Qing

NEW YORK/LONDON (Reuters) -World stocks rose on Tuesday and the dollar gained after plunging the previous day as Donald Trump's return to the White House brought mixed messaging on tariffs and highlighted markets' twitching about trade policy.

The Canadian dollar and Mexican peso bore the brunt of the market swings after Trump said he was mulling imposing 25% tariffs on the neighboring countries as soon as Feb. 1.

Still, some investors were relieved that Trump did not announce a more comprehensive sweep of tariffs at the start of his second presidency, and that supported a pull-back in the 10-year Treasury bond yield.

"Markets are still absorbing the flurry of executive orders released by Trump, but there is still a sense of relief in general," analysts at TD Securities said in a note.

The MSCI index for world stocks climbed 0.7%, and U.S. shares were mostly higher. The S&P 500 index added 0.9%, the Nasdaq rose 0.6%, and the Dow Jones jumped 1.2%.

A jump in the dollar had sent the Mexican peso sliding well over 1% earlier, while the Canadian dollar tumbled to a five-year low of $0.689, although the selloff later moderated somewhat.

Jan Von Gerich, chief strategist at lender Nordea, said investors should not assume that U.S. tariffs have been averted for good.

"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 comforted by the fact that the European Union and China have dodged tariffs for now.

Europe's continent-wide STOXX 600 index was 0.4% higher while MSCI's Asia ex-Japan stock index added 0.3%.

The dollar index, which measures the currency against six peers, was flat at 108.01.

It had earlier risen to 108.79, although it failed to make back the 1.2% it lost on Monday in its biggest daily fall since November 2023.

The euro ended the session flat at $1.04200, after jumping 1.42% a day earlier.

BOND YIELDS DIP AS CHINA HANGS ON

Many investors and foreign capitals had expected tariffs to be among a raft of executive orders Trump signed in his first day in office.

The dollar has risen about 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. As such, a more measured announcement from Trump on Monday with regard to tariffs knocked the U.S. dollar overnight.

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