The latest Market Talks covering U.S. politics. Published exclusively on Dow Jones Newswires throughout the day.

0720 ET - The Canadian dollar rises slightly but is struggling to recover materially from recent losses sustained after U.S. President-elect Donald Trump threatened to impose tariffs on Canada, Monex Europe analysts say in a note. It's notable that USD/CAD remains above 1.40, they say. USD/CAD has been slow to rise since the U.S. presidential election but has also largely failed to participant in any retracements. "This dynamic gives us confidence that a slow grind higher for [USD/CAD] is most likely as markets continue to price in Trump-related risks." For now, the U.S. Thanksgiving holiday and absence of data could see the exchange rate "tread water." USD/CAD falls 0.2% to 1.4005 after hitting a four-and-a-half-month high of 1.4181 on Tuesday, according to FactSet.(renae.dyer@wsj.com)

0601 ET - The Mexican peso recovers after U.S. President-elect Donald Trump said he had a "wonderful" conversation with Mexico's President Claudia Sheinbaum in the wake of his threat to hit Mexico with tariffs. Trump posted online that Sheinbaum would stop migration through Mexico, although she said her position was not to close borders. "Rather than signalling the all-clear for Mexican asset risk, probably the strongest takeaway is that volatility is here to stay," ING analyst Chris Turner says in a note. Heightened volatility means the peso might struggle to benefit from its higher yield, he says. USD/MXN falls 1.8% to 20.2641 after hitting a 28-month high of 20.8325 on Tuesday, according to FactSet. (renae.dyer@wsj.com)

0438 ET - Bitcoin continues to trade at slightly weaker levels after its recent pullback from record highs just shy of $100,000. The cryptocurrency last trades down 1.0% at $95,452, according to LSEG. It reached an all-time high of $99,830 on Friday on expectations for more favorable cryptocurrency regulation under U.S. President-elect Donald Trump. While it has suffered a correction this week, many analysts expect this to be short-lived with the cryptocurrency seen hitting the $100,000 mark soon. Standard Chartered expects bitcoin to reach $125,000 by the end of 2024 and $200,000 by the end of 2025. (renae.dyer@wsj.com)

1002 ET - President-elect Donald Trump's proposed 25% tariff on Canadian goods is likely to result in higher fertilizer prices for U.S. farmers, which would come at a time when high input costs are already crimping farmer profitability. "A 25% tariff on Canadian imports could lift Corn Belt potash prices relative to rest-of-world pricing," says ADM Investor Services in a note. "Though the U.S. is import dependent on all fertilizers, a 25% tariff would be acutely felt by the potash trade… U.S. farmers looking to 2025, where crop budgets are near breakeven, could see potash pricing increase about $80 a short ton to cover the levy." The firm adds that an alternative trading partner for potash is unlikely, since the second-largest exporter is Russia and that trade is currently prohibited. (kirk.maltais@wsj.com)

0926 ET - The Japanese yen gains on safe-haven demand and speculation that the Bank of Japan could raise interest rates in December. It has limited scope to rise much further against the dollar, however, MUFG Bank says. "Tariffs on Japan imports to the U.S. remain a risk and higher U.S. yields will limit USD/JPY downside moves," MUFG analyst Derek Halpenny says in a note. The Japanese currency is likely to perform better relative to non-dollar G-10 currencies given its recent price action and increased prospects of a December BOJ rate rise. The yen is the best performing G-10 currency in November. USD/JPY falls more than 1% to a five-week low of 106.333, while EUR/JPY drops to an eight-week low of 159.0900, according to FactSet. (renae.dyer@wsj.com)

0924 ET - President-elect Trump's shock threat of a 25% punitive tariff against imports from Canada could ultimately go away, but even if it does it won't be the last set of negotiations over trade and tariffs with the new White House, CIBC Capital Economics' Avery Shenfeld says. The economist believes Trump's willingness to brandish the tariff weapon so quickly, before even setting foot back in the Oval Office, portends a long road ahead for both Canada and Mexico to preserve what they negotiated during Trump's first term. Shenfeld says uncertainties over future trade access to the U.S. market could mean a significant drag on capital spending in Canada's export industries over the next couple of years, even if Canada and Mexico are able to ward off the immediate tariff threat by taking actions along the border. (robb.stewart@wsj.com; @RobbMStewart)

0909 ET - How Canada retaliated in 2018 to tariffs imposed by the U.S. may be a blueprint for how the country responds to a second Trump term, Scotiabank economist Derek Holt suggests. Holt points to U.S. border agency data showing no material security issue on America's northern border, which could mean that any token gestures Ottawa makes to assuage Trump's concerns about drugs and migrants flowing into the U.S. may not be enough to avoid the tariff. Canada may then feel it has little choice but to retaliate. Holt notes that Canadian Finance Minister Freeland in 2018 said the country had no choice but to retaliate with a measured, reciprocal dollar-for-dollar response. "The Canadian government's proven inclination is to retaliate and I'm not sure it will be different this time, albeit with far greater stakes." (robb.stewart@wsj.com; @RobbMStewart)

0905 ET -- Powersports manufacturers Polaris and BRP are both on track to get hit by potential Trump tariffs. UBS analysts say in a research note that Polaris sources about 19% of its parts from China, which are already subject to tariffs, and about a third of their cost of goods sold is sourced from Mexico. BRP, meanwhile, does the majority of manufacturing for the U.S. market in Canada and Mexico. Japanese motorcycle makers and Harley Davidson all have little or no exposure to Mexico or Canada, with Chinese manufacturing for those domestic markets. (ben.glickman@wsj.com; @benglickman)

0857 ET - It's "America First" for equity flows, which reached the highest levels in the U.S. since 2021 after President-elect Donald Trump's victory, Barclays analysts say in a research note. Driven by tech stocks, U.S. equities now represent an all-time high proportion of the MSCI World index, which captures large and midcap firms across 23 developed markets. Before the 2008 financial crisis, the U.S. represented around 45% of the index, compared with 67% now, and Europe comprised 28%, compared with the current 13%, the analysts say. Germany has had more outflows than France, but risks favor Germany with an election ahead. France is more concerning given lingering political risk, they say. U.K. flows have also turned negative again, as post-budget policy concerns resurface. (edward.frankl@wsj.com)

0841 ET - If the U.S. imposes President-elect Trump's threatened 25% tariff on all goods imported from Canada it will result in a swift and severe recession for America's northern neighbor that would crush demand for U.S. imports, warns Scotiabank. That's the conclusion of modelling work around various tariff scenarios. Assuming no retaliation, the promised tariff would mean Canada's economy contracts by a peak 3.8% quarter-on-quarter annualized and lose 2.7% of GDP in the long run, the analysis shows. With full retaliation, Canada's economy would contract 5.6% at the peak and lose 4.5% long-run GDP. (robb.stewart@wsj.com; @RobbMStewart)

0836 ET - President-elect Donald Trump's tariff threats against Canada and Mexico effectively mark the start of negotiations toward reshaping the USMCA free-trade agreement, UBS economists say in a note. The use of tariffs to target nontrade issues--illegal migration and drug trafficking, according to Trump's Truth Social posts--confirms a transactional orientation from the new administration, they say. All three countries remain economically heavily reliant on each other. Plus, hefty taxes on key U.S. imports like crude oil or lumber risk exacerbating U.S. consumer inflation, the economists note. But while U.S. diplomacy by social-media posts may trigger near-term market volatility, the fundamental backdrop remains supportive for U.S. growth, buoyed by deregulation and improved business confidence, they say. (edward.frankl@wsj.com)

(END) Dow Jones Newswires

November 28, 2024 07:20 ET (12:20 GMT)

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