President Trump recently announced his intentions to impose a 25% tariff on auto imports, alongside significant duties on semiconductors and pharmaceuticals. These threats aim to address what Trump perceives as ongoing unfair trade practices, particularly the disparity between EU and U.S. automotive tariffs. The proposed tariffs could disrupt the auto industry, which is already in a mess from previous tariff threats. Although similar actions were considered in 2018-2019 but ultimately shelved, updated investigations may inform new and effective tariff implementations. Meanwhile, EU trade officials are engaging with U.S. partners to mitigate reciprocal tariffs, even with denials of prior agreements to lower EU tariffs. Trump believes the move will increase U.S. investments from major global companies as businesses adjust to avoid impending tariffs by establishing domestic production facilities.

EQUITY

The S&P 500 opened the week with a record high, mostly through gains in the energy and materials sectors. The Federal Reserve's January meeting minutes are expected to provide insights, although current expectations are clear. Intel is seen climbing 16.1% on the rumoured stake sale of Altera, and Meta Platforms is ending its 20-session winning streak. Medtronic fell after missing revenue projections, while UnitedHealth was dragged down by workforce cut.

GOLD

Gold prices recovered to near record highs with escalating U.S. trade policy after Trump's remarks on tariff threats in key industries such as autos, semiconductors, and pharmaceuticals. Safe-haven demand propelled gold even with a stronger dollar and rising Treasury yields, although U.S.-Russia peace talks on Ukraine could reduce this. Profit-taking trimmed gains slightly, forming a somewhat clear peak and trough in a wide range sideways market.

OIL

WTI prices bounced off the support level at $70 and trended higher for the third consecutive day. The gain may come from supply concerns after a Ukrainian drone attack on a Russian oil pumping station, which reduced flows through the Caspian Pipeline Consortium by 30%-40%, equating to a loss of 380,000 barrels per day. Cold weather in the U.S. threatened to halt production, with North Dakota's output declining by up to 150,000 barrels per day. Auto tariffs proposed by the Trump administration had not much effect on crude prices.

CURRENCY

The U.S. dollar is gaining on safe-haven demand as Russia-Ukraine peace talks prove to be challenging. The Australian dollar initially held firm after the Reserve Bank of Australia's rate cut but eventually fell to support level. Meanwhile, the euro traded lower while sterling was steady, uncertain of the outcome in the peace negotiations. The yen also retreated even as markets forecast further rate hikes by the Bank of Japan.