Morning Chronicle - US stocks rally despite Trump tariff threat but European stocks fall

Trump, who doesn't take office until January 20, made his threat in social media posts Monday night, announcing huge import tariffs against neighbors Canada and Mexico and also rival China if they do not stop illegal immigration and drug smuggling.

Both the Dow and S&P 500 notched all-time highs, with investors regarding the incoming president's words as a bargaining chip.

"In theory, higher tariffs should not be good news for stocks. But, you know, I think the market's chosen to think of (it) as a negotiating tactic," said Steve Sosnick of Interactive Brokers.

"You have bullish sentiment," said LBBW's Karl Haeling. "People are tending to look at things as positively as possible."

But General Motors, which imports autos from Mexico to the United States, slumped 9.0 percent, while rival Ford dropped 2.6 percent.

Overseas bourses were also buffeted by the news. European stocks followed losses in Asia, despite Trump excluding Europe as an immediate target for tariffs.

"These are his first direct comments on tariffs and tariff levels since becoming president-elect, and they have roiled markets," said Kathleen Brooks, research director at XTB trading group, ahead of the Wall Street open.

"It is early days, and there are plenty of opportunities for Trump to direct his attention to Europe down the line," Brooks added.

The US dollar rallied against its Canadian equivalent, China's yuan and Mexico's peso, which hit its lowest level since August 2022.

In other economic news, the Conference Board's consumer confidence index rose to 111.7 this month, up from 109.6 in October, boosted by greater optimism surrounding the labor market.

"November's increase was mainly driven by more positive consumer assessments of the present situation, particularly regarding the labor market," said Dana Peterson, chief economist at The Conference Board.

Pantheon Macroeconomics chief US economist Samuel Tombs added in a note that the increase in consumer confidence overall "likely was driven by euphoria among Republicans."

"The index also jumped in late 2016, when Mr. Trump was elected for the first time," he said.

Federal Reserve meeting minutes showed policy makers expect inflation to keep cooling, signaling a gradual approach to interest rate cuts if price increases ease further and the job market remains strong.

- Key figures around 2150 GMT -

New York - Dow: UP 0.3 percent at 44,860.31 (close)

New York - S&P 500: UP 0.6 percent at 6,021.63 (close)

New York - Nasdaq: UP 0.6 percent at 19,174.30 (close)

London - FTSE 100: DOWN 0.4 percent at 8,258.61 (close)

Paris - CAC 40: DOWN 0.9 percent at 7,194.51 (close)

Frankfurt - DAX: DOWN 0.6 percent at 19,295.98 (close)

Tokyo - Nikkei 225: DOWN 0.9 percent at 38,442.00 (close)

Hong Kong - Hang Seng Index: FLAT at 19,159.20 (close)

Shanghai - Composite: DOWN 0.1 percent at 3,259.76 (close)

Euro/dollar: DOWN at $1.0482 from $1.0495 on Monday

Pound/dollar: DOWN at $1.2567 from $1.2568

Dollar/yen: DOWN at 153.06 yen from 154.23 yen

Euro/pound: DOWN at 83.41 pence from 83.51 pence

Brent North Sea Crude: DOWN 0.3 percent at $72.81 per barrel

West Texas Intermediate: DOWN 0.3 percent at $68.77 per barrel

S.Jones--MC-UK