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MORNING BID MARKETS BECOMING NUMB TO TARIFF VOWS

Another day, another bout of threats from "tariff man". This time on pharmaceutical and semiconductor imports that investors seem to have taken in stride for now, expecting the latest measure to also be used as a negotiating tool.

U.S. President Donald Trump said sectoral tariffs on pharmaceuticals and semiconductor chips would start at "25% or higher, and it will go very substantially higher over the course of a year." He intends to impose similar tariffs on autos as soon as April 2.

Trump, the self-declared "tariff man," had been telegraphing his intentions of imposing tariffs for months, so some of the news may have been priced in. And while investors remain wary, they are looking beyond the ebbing tariff worries.

That leaves the spotlight on European stocks' stunning start to the year, with the pan-European STOXX 600 index .STOXX closing at record high on Tuesday, taking its 2025 gains to nearly 10%. Futures point to a subdued open.

The rising chances of increased military spending in Europe against a backdrop of peace talks to end the Russia-Ukraine conflict have helped defence stocks this week and with no resolution in sight, the defence sector may be set for its ninth straight session of gains.

Earnings from top iron ore producer Rio Tinto RIO.AX will be the main event in the corporate world during European hours with investors keen to hear from Rio on how it will navigate choppy waters in a world full of tariffs.

BHP BHP.AX, the world's largest listed miner, on Tuesday flagged risks to global growth from potential trade tensions, as it logged its lowest first-half profit in six years.

On the macro side, UK inflation data for January is due to be out at 0700 GMT and will likely show a slight acceleration to 2.8% last month from 2.5% in December, according to a Reuters poll.

That along with Tuesday's data showing the UK's accelerating wage growth has underscored why the Bank of England has been cautious about cutting interest rates despite a weak overall economy, leaving sterling GBP=D3 well supported near a two-month peak.

The pound is up 1.8% in February and on course to snap a three-month losing streak amid dollar weakness.

(Ankur Bannerjee)