US Stock Futures Steady, Dollar Weakens as Investors Eye China's Tariffs Restraint

Amidst rising tensions in the emerging trade war, US stock futures have stabilized, and the dollar has depreciated as investors speculate that China's measured response to retaliatory tariffs may avert a worst-case scenario.

China's government swiftly retaliated after the US imposed 10% tariffs on Tuesday. However, its response appears carefully calibrated to minimize the impact on China's economy while signaling to Trump its ability to inflict damage on various fronts.

This restraint has tempered market reactions, particularly as Trump expressed a willingness to engage in dialogue with Chinese leaders. Earlier, Trump granted last-minute tariff exemptions to Canada and Mexico following discussions with their respective leaders. These deferrals reinforce the view that Trump perceives tariffs as a negotiating tactic but remains hesitant to inflict economic harm on Americans.

"We maintain our medium-term bullish stance on risky assets but slightly downgrade the short-term outlook given the elevated uncertainty," said Mohit Kumar, chief economist at Jefferies International. "While tariffs may not be as severe as anticipated, we expect increased volatility in the near term."

S&P 500 contracts show minimal movement after Monday's decline approached 2%. West Texas Intermediate oil prices fell up to 1.9% as Beijing imposed levies on US crude and liquefied natural gas. Hong Kong-listed Chinese stocks remain up 3% today.

Europe's Stoxx 600 benchmark fluctuated amid mixed corporate earnings. According to Morgan Stanley, 11% of companies representing around a quarter of Europe's market cap reported higher earnings, while 55% exceeded sales estimates. UBS Group AG rose on Tuesday after announcing a $3 billion share buyback. BNP Paribas gained after reporting a surge in trading revenue, while Vodafone Group Plc declined following its announcement of deteriorating conditions in Germany.

Meanwhile, Federal Reserve Bank of Chicago President Austan Goolsbee advised caution in lowering borrowing costs amid increased uncertainty introduced by the Trump administration. Other Fed officials, including Raphael Bostic, Mary Daly, and Philip Jefferson, are scheduled to speak later today.

Key Events This Week:

* US factory orders, durable goods (Tuesday)
* Alphabet earnings (Tuesday)
* Speeches by Fed's Raphael Bostic, Mary Daly, and Philip Jefferson (Tuesday)
* China Caixin services PMI (Wednesday)
* Eurozone HCOB Services PMI, PPI (Wednesday)
* US trade (Wednesday)
* Speeches by Fed's Austan Goolsbee, Tom Barkin, Michelle Bowman, and Philip Jefferson (Wednesday)
* Eurozone retail sales (Thursday)
* UK rate decision (Thursday)
* US initial jobless claims (Thursday)
* Speeches by Fed's Christopher Waller and Lorie Logan (Thursday)
* Amazon earnings (Thursday)
* US nonfarm payrolls, unemployment, University of Michigan consumer sentiment (Friday)
* Speeches by Fed's Michelle Bowman and Adriana Kugler (Friday)

Market Movements:

Stocks:

* Stoxx Europe 600: -0.1%
* S&P 500 futures: -0.2%
* Nasdaq 100 futures: Unchanged
* Dow Jones Industrial Average futures: -0.2%
* MSCI Asia Pacific Index: +1.1%
* MSCI Emerging Markets Index: +1.5%

Currencies:

* Bloomberg Dollar Spot Index: -0.2%
* Euro: -0.3% to $1.0315
* Japanese yen: -0.4% to 155.40 per dollar
* Offshore yuan: Unchanged at 7.3076 per dollar
* British pound: -0.3% to $1.2410

Cryptocurrencies:

* Bitcoin: -3.6% to $98,313.42
* Ether: -4.2% to $2,701.51

Bonds:

* 10-year Treasury yield: +2 basis points to 4.57%
* Germany's 10-year yield: +3 basis points to 2.42%
* Britain's 10-year yield: +3 basis points to 4.52%

Commodities:

* Brent crude: -1% to $75.23 per barrel
* Spot gold: -0.1% to $2,811.58 per ounce