US stocks trim losses as Trump postpones tariffs on Mexico

US stocks pared some of their losses on Monday after President Donald Trump confirmed a one-month delay in tariffs on Mexico. This followed Mexico’s agreement to deploy 10 000 troops to help prevent drug trafficking into the US, particularly fentanyl. The S&P 500 fell by 0.70%, the Dow Jones dropped 125 points, and the Nasdaq declined by less than 1% after all three major indices opened lower. Over the weekend, Trump had announced a 25% tariff on goods from Mexico and Canada, along with a 10% levy on imports from China, set to take effect the following day. In response, Canada, Mexico, and China vowed to retaliate. Trump also signalled plans for future tariffs on the European Union and a reduction in aid to South Africa.

South Africa's rand, stocks, and government bonds all took a hit on Monday following an announcement by US President Donald Trump that he would suspend aid to the country. Trump made an unsubstantiated claim on Sunday, alleging that "South Africa is confiscating land" and that "certain classes of people" were being treated "very badly," adding that he would halt funding until an investigation was conducted. By 15h02, the rand had weakened by 0.90%, trading at 18.86 against the US dollar, after earlier dipping almost 2%. The FTSE/JSE All Share Index ended the day about 0.40% lower, while the price of the benchmark 2030 government bond fell. Meanwhile, the cost of insuring South African debt against default surged to its highest level since early August.

In the UK, the FTSE 100 experienced its worst decline in nearly four months, dropping by more than 1%. This came amid heightened fears of a global trade war. Trump’s tariffs on Canada, Mexico, and China had sparked concerns about an economic slowdown, although the tariff on Mexico was delayed for a month. Trade-sensitive sectors suffered significant losses, with automakers down 2.10%, beverages falling 3.10%, and personal goods dropping 2.20%. Meanwhile, UK manufacturing showed signs of struggle in January, with declines in output, new orders, and employment, according to PMI data. The Bank of England is expected to meet on Thursday, with a 25bps rate cut widely anticipated.

European stocks also saw a decline on Monday, following Trump's announcement of tariffs on China, Canada, and Mexico. The STOXX 50 fell by 1.40% to 5 214, and the pan-European STOXX 600 dropped 0.90% to 534. However, both indices managed to close above their mid-session lows after Trump delayed the tariffs on Mexico just before the market’s close. Trump’s decision to impose 25% tariffs on Mexico and Canada, and a 10% levy on China, raised concerns about global trade disruptions. Additionally, he pledged to impose tariffs on the EU and UK at a later date, adding to uncertainty in international trade.

In Asia, Japanese stocks followed the global trend, with the Nikkei 225 falling 2.66% to close at 38 520, and the broader Topix Index dropping 2.45% to 2 720, both reaching their lowest levels in about two weeks. This decline was driven by concerns over the impact of Trump's tariffs on key US trading partners. Meanwhile, stocks in China also fell, with the Shanghai Composite edging down 0.06% to close at 3 251 and the Shenzhen Component dropping 1.33% to 10 156. This followed disappointing economic data, including a surprise contraction in factory activity in January and a sharp slowdown in the services sector. Industrial profits in China also declined by 3.30% in 2024. On a more positive note, China announced new initiatives to support its stock market, including measures aimed at boosting the growth of equity and bond ETFs.

In the commodities markets, WTI crude oil futures eased, trading around $73 per barrel after OPEC+ reaffirmed its gradual output increase and removed the US Energy Information Administration (EIA) from its list of sources for monitoring production. Gold rose to a record high of $2 820 per ounce in February, amid looser monetary policies from major central banks and market uncertainty over the potential impact of the US's unclear trade policies on the global economy.