111 - Image is broken, SM!!!

(Bloomberg) — As President Trump announced a 25% import tariff on steel and aluminum and the introduction of reciprocal tariffs, investors flocked to safe-haven assets. The dollar was slightly stronger against most G10 currencies, and gold, in particular, surged over 1.7%, breaking through the $2,900 per ounce mark to hit a new high. MUFG assessed that "the increased risk of greater disruption to global trade from additional tariff hikes supports the dollar." However, the New York stock market rebounded with a tech rally, and short-term attention is focused on the U.S. consumer price index and remarks by Fed Chair Powell due this week.

Overnight, the dollar-won exchange rate (BGN) closed around 1,451 won, down 3.2 won from the previous trading day, showing relative resilience of the won. In Korea, there seems to be optimism that the impact of Trump's tariffs may not be as significant as expected. Bloomberg economist Kwon Hyo-sung assessed that while the steel industry, which accounts for about 13% of the U.S. export market, would be hit, the overall impact on the Korean economy would not be significant. Barclays also predicted that the impact on Korea could be greatly reduced due to the different composition of trade items between Korea and the U.S. The following are key issues that market participants may be interested in.

Gold prices near $3,000 on Trump tariffs, China demand expectations

Gold prices hit a record high as Trump announced various tariffs, adding to global financial market uncertainty, and China allowed insurers to buy gold. Spot gold prices soared to $2,911 per ounce on Monday, and if Trump's tariffs continue to shake the market, $3,000 seems only a matter of time. Chinese authorities launched a pilot program last Friday allowing 10 domestic insurers to invest up to 1% of their assets in gold. Minsheng Securities estimated that about 200 billion yuan ($27.4 billion) of funds could be affected by this.

Moreover, the People's Bank of China (PBOC) increased its gold reserves for three consecutive months until January this year, indicating a continued push for diversification of foreign exchange reserves despite gold prices being at record highs. In the past, China has typically continued buying gold for several months once it started. During Trump's first term, the PBOC increased its gold holdings for about 10 consecutive months. Westpac Banking stated, "Gold is still in a good position, with little to hinder it," adding, "The inherently unpredictable and disruptive Trump threatens tariffs on both allies and adversaries, and his threat of 100% tariffs on BRICs if they attempt de-dollarization enhances gold's safe-haven appeal."

European gas prices hit two-year high

European natural gas prices hit a two-year high, and rapidly depleting inventories put Europe at risk of another energy crisis. Dutch TTF futures, which have risen for four consecutive weeks, surged 5.4% to €58.75 per megawatt-hour on Monday, the highest since February 2023. Continued cold weather in Northwest Europe is likely to sustain the early-year rally in natural gas demand.

The risk of gas stock depletion is heightened by increased fuel consumption, with inventories already at 49% of total storage capacity, compared to 67% at the same time last year. According to ICIS's monthly outlook, European gas consumption is expected to increase by 17% year-on-year, driven by residential and commercial demand. ICIS predicted that end-of-winter inventories would be only 37%. Global Risk Management reported that not only near-term but also 2026-2027 futures prices have risen.

Goldman Sachs 'Hedge funds turn bullish on U.S. stocks'

Hedge funds are abandoning their bearish outlook on the U.S. stock market as corporate earnings come in stronger than expected. According to Goldman Sachs' prime brokerage report for the week ending February 7, hedge funds ended five consecutive weeks of net selling and bought U.S. stocks at the fastest pace since November last year. The information technology sector, particularly software and semiconductor stocks, recorded the largest net buying since December 2021.

Regarding this move, Vincent Lin, co-head of Prime Insight and Analysis at Goldman Sachs, noted in an investor memo, "It suggests that hedge funds have started to take a more active interest in the AI theme since the DeepSeek-induced stock sell-off on January 27." John Flood, partner and head of U.S. equity sales trading at Goldman Sachs, pointed out, "Amid an uncertain macroeconomic environment, micro data heralds another strong earnings season."

Trump's Gaza plan hints at reduced U.S. debt

Trump stated in his Gaza plan that Palestinians would not be guaranteed the right to return to that territory. In a Fox News interview, he said, "They will have much better housing, so no," when asked if they have the right to return to Gaza. He said it would take years to rebuild Gaza and instead proposed relocating them to other "safe communities" and developing Gaza as "real estate for the future" that he owns. This is likely to provoke anger from Palestinians and many countries around the world.

Meanwhile, Trump said that Elon Musk's Department of Government Efficiency (DOGE) found something unusual while reviewing Treasury Department data, suggesting that "debt may be less than thought." It is unclear whether he was talking about U.S. government debt or payments processed through the Treasury. An anonymous administration official said that DOGE's review and improvement of the Treasury's payment system would reduce future deficits and debt.

BP shares soar on Elliott's stake acquisition

BP shares surged after a Bloomberg report that Elliott, one of the world's most aggressive activist funds, had acquired a significant stake in BP. BP jumped over 8.2% to trade at 468.9 pence in London trading on Monday, marking the biggest gain since 2020. BP has experienced ups and downs over the past 15 years, from the Deepwater Horizon spill to the sudden dismissal of CEO Bernard Looney amid internal scandals.

According to people familiar with the matter, several competitors are crunching numbers on a potential BP merger or acquisition. It is unclear if anyone is seriously considering a merger or acquisition, but the fact that such talks are happening shows how far BP has fallen. Biraj Borkhataria, an analyst at RBC Europe, said, "An activist fund would at least demand a change of BP's chairman."

For inquiries related to the article:

Kim Dae-do (London), dkim640@bloomberg.net;

Seo Eun-kyung (New York), eseo3@bloomberg.net