By Amanda Cooper and Elizabeth Howcroft
LONDON/PARIS (Reuters) -U.S. stocks looked set to pull back modestly from their all-time highs on Friday, as a degree of caution set in after President Donald Trump’s latest comments on tariffs and trade.
The dollar headed for its biggest weekly drop in two months, under pressure from a greater sense of confidence among investors that the Federal Reserve may keep cutting interest rates this year.
Futures on the S&P 500 and Nasdaq were down around 0.1%, suggesting a slightly weaker start to trading on Wall Street later. A survey of U.S. business activity for early January later could show a modestly softer pace of growth in both the manufacturing and services sector.
Trump told business leaders at the World Economic Forum in Davos, Switzerland, on Thursday that he wanted to lower global oil prices, interest rates and taxes.
In an interview with Fox News on Thursday evening, Trump said his recent conversation with President Xi Jinping was friendly and he thought he could reach a trade deal with China.
“But we have one very big power over China, and that’s tariffs, and they don’t want them, and I’d rather not have to use it, but it’s a tremendous power over China,” he said.
China’s stock markets and currency rallied on the back of his comments, leaving the blue chip index up 0.8% and the yuan strengthened against the dollar, which fell 0.5% to 7.2492 in the offshore market.
Oil prices, meanwhile, initially fell after Trump’s comments, but had recovered some poise by Friday, leaving U.S. crude futures up 0.4% at $74.90 a barrel and Brent crude up 0.5% at $78.70.
Amelie Derambure, Senior Multi-Asset Portfolio Manager at Amundi in Paris said Trump’s pro-America policies require lower oil prices.
“These types of policies could also benefit other players in the world, like Europe for instance, if we have a lower oil price that’s going to benefit Europe as well – so at last there is something that he wants to implement that is not detrimental to Europe,” she said.
“It shows that he’s willing to negotiate and he wants to be maybe a bit more subtle this time.”
European stocks reflected this greater optimism. The STOXX 600 rose 0.3% on the day, driven by a burst higher in luxury goods retailers after solid earnings from Burberry.
BlackRock chief executive Larry Fink told a panel at the World Economic Form in Davos on Friday that it could be time to start investing money in Europe again.
“There’s too much pessimism on Europe,” he said during a panel debate on the global economic outlook. “I believe it’s probably time to be investing back into Europe,” he said, adding there was still progress to be made in areas such as capital markets union.
