Steel Tariff Threat Fails to Move Dollar or Stocks

President Trump's plan to double US steel and aluminium tariffs to 50% had little market impact, with the Canadian dollar rising and US and European futures only slightly lower. Despite threats of retaliation from the EU and ongoing tensions with China, investors showed limited concern, possibly anticipating another delay. Meanwhile, Fed Governor Christopher Waller warned of economic risks from tariffs but reiterated support for rate cuts later this year.

Equities

The FTSE 100 rose 0.6% on Friday, ending its best month in four, despite a volatile session triggered by renewed US-China trade tensions. The FTSE 250 added 0.1%, marking its strongest month since July 2024. Gains were capped after former US President Donald Trump accused China of breaking a tariff agreement. However, sentiment remained broadly positive following a limited trade agreement between the UK and US earlier in the month.

Among UK stocks, insurer and asset manager M&G climbed 5.5%, the largest gain in the FTSE 100, after Japan’s Dai-ichi Life Holdings announced plans to acquire a 15% stake in the company. The move signalled confidence in M&G’s future prospects and added to recent optimism about its strategic positioning.

In the US, the S&P 500 was virtually flat on Friday, down just 0.01% to close at 5,911.69, but it rose 6.2% in May—its strongest monthly performance since November 2023. The Nasdaq fell 0.3% on the day but jumped 9.6% over the month, also its biggest monthly rise since November. The Dow Jones edged up 0.1% to 42,270.07. Markets opened lower after Trump criticised China on social media, but pared losses after he suggested progress was possible in an upcoming call with President Xi Jinping.

Ulta Beauty was among the biggest movers in the US, with its shares surging 11.8% after the company raised its annual profit forecast. Strong quarterly earnings supported the move, reflecting solid demand in its cosmetics and skincare categories. Management indicated continued growth momentum heading into the second half of the year.

Forex & Commodities

The US dollar edged lower on Monday as traders reacted to fresh tariff threats and pushback from Beijing. The greenback slipped 0.3% to 143.57 yen, unwinding part of last week’s 1% gain. The US dollar index fell 0.1% to 99.283, while the euro ticked up 0.1% to $1.1362 and the pound rose 0.2% to $1.3485.

The weakness followed Donald Trump’s announcement late on Friday that tariffs on imported steel and aluminium will be doubled to 50% from Wednesday. China rejected allegations it had violated a critical minerals agreement and pledged to respond firmly. The policy backdrop remains uncertain as the Senate prepares to consider a new tax and spending bill that would increase US debt by an estimated $3.8 trillion over the next decade. Barclays warned that Section 899 of the bill, targeting countries with “unfair” taxes, could reduce foreign investment and weigh further on the dollar.

Gold prices climbed over 1% to $3,326.45 an ounce as geopolitical tensions and tariff uncertainty drove demand for safe-haven assets. US gold futures rose 1.1% to $3,351. Silver gained 0.6% to $33.16 an ounce, while platinum and palladium were little changed.

Oil prices also moved higher. Brent crude added 2.3% to $64.24 a barrel, and US West Texas Intermediate rose 2.7% to $62.45. OPEC+ agreed to maintain its existing output hike of 411,000 barrels per day in July, easing concerns over a larger increase. Traders also noted a sharp rise in implied US gasoline demand ahead of the peak driving season and a continued drop in US rig activity, with active rigs falling to their lowest level since November 2021.