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US announces new tariff rates ahead of trade talks

deadline

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Asian, European shares head for worst week since April

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Dollar set for biggest weekly gain in nearly three years

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US jobs data pivotal for September rate cut hopes

By Samuel Indyk and Nell Mackenzie

LONDON, Aug 1 (Reuters) - Global shares tumbled on

Friday after the U.S. slapped dozens of trading partners with

steep tariffs, while investors anxiously awaited U.S. jobs data

that could make or break the case for a Federal Reserve rate cut

next month.

The pan-European STOXX 600 fell 1.3%, taking its

weekly fall to almost 2%, which would be its biggest weekly drop

since U.S. President Donald Trump announced so-called reciprocal

tariffs on April 2.

Both Nasdaq futures and S&P 500 futures were

down around 1%.

Late on Thursday, Trump signed an executive order imposing

tariffs ranging from 10% to 41% on U.S. imports from foreign

countries and territories. Rates were set at 25% for India's

U.S.-bound exports, 20% for Taiwan's, 19% for Thailand's and 15%

for South Korea's.

He also increased duties on Canadian goods to 35% from 25%

for all products not covered by the U.S.-Mexico-Canada trade

agreement, but gave Mexico a 90-day reprieve from higher tariffs

to negotiate a broader trade deal.

"The August 1 announcement on reciprocal tariffs is somewhat

worse than expected," said Wei Yao, research head and chief

economist in Asia at Société Générale.

Market reaction was not as volatile as April's global asset

declines, she added. "We are all getting much more used to the

idea of 15-20% tariffs being manageable and acceptable, thanks

to the worse threats earlier."

MSCI's broadest index of Asia-Pacific shares outside Japan

fell 1.5%, bringing the total loss this week to

roughly 2.7%.

Japan's Nikkei closed 0.7% lower, Chinese blue chips

ended 0.5% down and Hong Kong's Hang Seng index

lost more than 1%.

On Thursday, Wall Street failed to hold onto an earlier

rally. Data showed U.S. inflation picked up in June, with new

tariffs pushing prices higher and stoking expectations that

price pressures could intensify, while weekly jobless claims

signalled the labour market remained on a stable footing.

Fed funds futures imply just a 45% chance of a rate cut in

September, compared with 65% before the Federal Reserve held

rates steady on Wednesday, according to LSEG data.

Much now will depend on the U.S. jobs data due later in the

day, and any upside surprise could price out the chance for a

cut next month. Forecasts are centred on a rise of 110,000 in

nonfarm payrolls in July.

"Fed Chair Jay Powell has placed greater emphasis on the

unemployment rate, which is expected to rise marginally from

4.1% to 4.2%," said ING FX strategist Francesco Pesole.

"Hardly enough to sound the alarm on the jobs market."

The greenback found support from fading prospects of

imminent U.S. rate cuts, with the dollar index up 1.5% this week

against its peers to 100, in the biggest weekly rise

since September 2022.

The yen weakened past 150 per dollar for the first

time since April. The Bank of Japan held interest rates steady

on Thursday and revised up its near-term inflation expectations,

but Governor Kazuo Ueda sounded a little dovish in the press

conference.

Two-year Treasury yields fell one basis point to

3.9449%, while benchmark 10-year yields rose 3 basis

points to 4.388%, after slipping 2 bps the day before.

In commodity markets, oil prices continued to fall after a

1% plunge on Thursday. Brent fell 1% to $70.97 per

barrel, while U.S. crude fell 1% to $68.53 per barrel.

Spot gold rose 0.3% to $3,298 an ounce.

(Additional reporting by Stella Qiu and Rae Wee. Editing by

Andrew Heavens and Mark Potter)