(Updates prices)

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Dollar soars against Mexican peso and Canadian dollar

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US stocks rise after Trump avoids day-one tariffs

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Markets remain on edge about trade levies

By Harry Robertson and Koh Gui Qing

NEW YORK/LONDON, Jan 21 (Reuters) - World stocks rose on

Tuesday and the dollar gained after plunging the previous day as

Donald Trump's return to the White House brought mixed messaging

on tariffs and highlighted markets' twitching about trade

policy.

The Canadian dollar and Mexican peso bore the brunt of the

market swings after Trump said he was mulling imposing 25%

tariffs on the neighboring countries as soon as Feb. 1.

Still, some investors were relieved that Trump did not

announce a more comprehensive sweep of tariffs at the start of

his second presidency, and that supported a pull-back in the

10-year Treasury bond yield.

"Markets are still absorbing the flurry of executive orders

released by Trump, but there is still a sense of relief in

general," analysts at TD Securities said in a note.

The MSCI index for world stocks climbed

0.7%, and U.S. shares were mostly higher. The S&P 500 index

added 0.9%, the Nasdaq rose 0.6%, and the Dow

Jones jumped 1.2%.

A jump in the dollar had sent the Mexican peso sliding well

over 1% earlier, while the Canadian dollar tumbled to a

five-year low of $0.689, although the selloff later moderated

somewhat .

Jan Von Gerich, chief strategist at lender Nordea, said

investors should not assume that U.S. tariffs have been averted

for good.

"We shouldn't get too carried away by this, the fact that he

didn't start with tariffs doesn't mean that they won't come

later," he said. "For the global equity market, I think it's all

about Trump now."

European shares were muted after Asia eked out small gains

overnight, with investors and governments comforted by the fact

that the European Union and China have dodged tariffs for now.

Europe's continent-wide STOXX 600 index was 0.4%

higher while MSCI's Asia ex-Japan stock index

added 0.3%.

The dollar index, which measures the currency against

six peers, was flat at 108.01.

It had earlier risen to 108.79, although it failed to make

back the 1.2% it lost on Monday in its biggest daily fall since

November 2023.

The euro ended the session flat at $1.04200, after

jumping 1.42% a day earlier.

BOND YIELDS DIP AS CHINA HANGS ON

Many investors and foreign capitals had expected tariffs to

be among a raft of executive orders Trump signed in his first

day in office.

The dollar has risen about 5% since Trump won the Nov. 5

election, partly as investors have braced for wide-ranging

levies that would likely hurt America's trading partners. As

such, a more measured announcement from Trump on Monday with

regard to tariffs knocked the U.S. dollar overnight.

The U.S. 10-year Treasury yield was down 4.7

basis points on Tuesday at 4.558%.

They were nonetheless still up around a percentage point

since the Federal Reserve started cutting rates in

mid-September, reflecting a strong economy and dwindling

prospects for large Fed reductions this year.

Chinese stocks were steady as Trump largely steered clear of

definitive threats against the country's exports, although he

warned he could impose tariffs if Beijing failed to approve a

U.S. deal to be a half-owner of short-video app TikTok's U.S.

business.

"It's part of a transactional methodology," said Timothy

Graf, head of macro strategy for EMEA at State Street.

"It's better news than just slapping 60% or 100% tariffs on

something, but something is going to be coming, I would think."

China's CSI 300 index was unchanged while Japan's

Nikkei 225 climbed 0.32%.

Oil prices fell on Tuesday as investors assessed Trump's

plans to boost U.S. energy production, as well as the delay on

tariffs.

Brent crude was down 0.8% at $79.50 a barrel, while

U.S. crude was 2.3% lower at $75.90 a barrel.