By Nell Mackenzie and Johann M Cherian
LONDON/SINGAPORE (Reuters) -Global markets climbed on Monday and the euro rallied after U.S. President Donald Trump kicked his threat to slap 50% tariffs on European Union goods into July, marking another temporary trade policy reprieve.
MSCI's broadest index of world shares rose 0.2%. The pan-European stocks index, last up .9%, recovered to where it was trading before Trump on Friday unexpectedly called for 50% tariffs on European goods, saying negotiations with the region had become too sluggish.
On Sunday, Trump reversed course, pushing the deadline for tariffs to July 9 from June 1, after European Commission President Ursula von der Leyen said the 27-nation bloc needed more time to produce a deal.
Trump's latest policy moves were a reminder to investors how quickly circumstances could change. Analysts have pointed out that investors are shifting their money out of U.S. markets to Europe and Asia as they price in a possible U.S. recession and a consequent global slowdown.
Last Friday's comments were a reminder of Trump and his administration’s unpredictable and seemingly incoherent policies and decision-making, Commerzbank said in a note.
“Now, a really toxic cocktail is mixed for the U.S. consisting of (1) rising risk premium to hold U.S. assets, (2) global investors' move towards increased portfolio diversification, and (3) an increased homeland focus,” said a note from SEB Research, adding that they expected the dollar to lose value while U.S. interest rates could rise further.
EURO GAINS
The dollar fell 0.1% against a basket of currencies on Monday. The euro appreciated 0.23% to $1.1380 – its highest since late April, while the pound ticked almost 0.2% upwards to 1.3567.
“It still is largely a ‘sell dollar story',” said Christopher Wong, currency strategist at OCBC.
“The policy unpredictability surrounding Trump's tariffs and of course, the erosion of the U.S. exceptionalism, this could potentially still undermine sentiment and the confidence in the medium term.”
Trading volumes on Monday were expected to be thinner than usual, given that markets in the United States and Britain were closed due to public holidays.
Ballooning debt levels in developed economies were also brought back into focus following Moody's credit rating downgrade of the United States and weak debt auctions in the U.S. and Japan last week.
Inflation reports come from Japan and Germany later this week, along with price data on U.S. goods and services.
