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Dollar up as Trump talks of tariffs on steel, aluminium

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Stocks shrug off tariff threat, with S&P 500 futures

higher

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Markets see less scope for Fed rate cuts this year

By Harry Robertson and Wayne Cole

LONDON/SYDNEY, Feb 10 (Reuters) - The dollar edged

higher on Monday after U.S. President Donald Trump warned more

tariffs were imminent including on steel and aluminium, although

U.S. futures and European stocks shrugged off the looming levies

and rose.

Speaking to reporters on Air Force One on Sunday, Trump said

he would announce on Monday 25% tariffs on all steel and

aluminium imports into the U.S., and reveal other reciprocal

tariffs soon afterwards.

China's retaliatory tariffs on some U.S. exports take effect

on Monday, with no sign as yet of progress towards a new trade

arrangement between Beijing and Washington.

Investors reacted by pushing the dollar slightly higher,

with the index tracking the U.S. currency up just over

0.1% from Friday's close, at 108.21.

It climbed 0.4% against Japan's yen, which enjoyed

its best week since November last week as investors bet on more

Bank of Japan rate hikes. The euro was broadly flat at

$1.0321.

The dollar rose against the currencies of

commodity-exporting countries before moderating. The Canadian

dollar was last around 0.3% lower.

"Much uncertainty about the nature, timing and magnitude of

these tariffs looks likely to keep the dollar supported this

week," said Chris Turner, global head of markets at European

bank ING.

"If these reciprocal tariffs come in this week against those

countries who have a higher tariff rate than the U.S., then it

may be countries like Brazil, India and Korea who are most

exposed."

U.S. stock futures initially fell on Monday but quickly

recovered as investors looked ahead to another busy week of

earnings. S&P 500 contracts were last up 0.53%, after the

cash index fell 0.95% on Friday.

Shares had been roiled by some mixed earnings numbers last

week, although overall earnings per share growth is running at

12% and above early expectations of 8%.

Europe's continent-wide STOXX 600 index rose 0.5%

after slipping 0.38% on Friday.

The shares of some European steelmakers slipped, including

Luxembourg-based ArcelorMittal and Germany's Salzgitter

.

Analysts say tariffs could put upward pressure on U.S.

inflation and further limit room for the Federal Reserve to ease

policy, a possible outcome which has helped support the U.S.

dollar since Trump's re-election.

Markets had already scaled back expected U.S. rate cuts this

year to just 36 basis points, from around 42 basis points,

following a broadly upbeat payrolls report on Friday.

Fed Chair Jerome Powell is due to appear before the House of

Representatives on Tuesday and Wednesday and the impact of

tariffs on policy is sure to be a hot-button issue.

U.S. Treasuries were broadly steady on Monday, with yields

on 10-year notes at 4.493%.

Japan's Nikkei stock index finished flat, while Hong

Kong's Hang Seng rallied 1.84%. China's CSI 300

climbed 0.21%.

"Markets are largely taking unfolding events in their

stride," said Derren Nathan, head of equity research at

Hargreaves Lansdown.

"Stocks in China and Hong Kong were up overnight - perhaps

(due to) a mixture of trade restrictions not being as bad as

they might have been and hope for further Chinese stimulus."

Worries about Chinese deflation were soothed by data showing

consumer inflation accelerated to its fastest in five months in

January.

Gold prices hit another record high at $2,911 an ounce

, helped in part by talk that Trump might impose tariffs

on the metal.

London aluminium traded in a tight range on Monday

as investors weighed the possible metals tariffs.

Oil prices ticked up after three weeks of losses that have

been partly driven by trade concerns. Brent crude was

1.4% higher at $75.69 a barrel.