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Asian stock markets : https://tmsnrt.rs/2zpUAr4

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Dollar up as Trump talks of tariffs on steel, aluminium

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Markets see less scope for Fed rate cuts this year

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S&P 500 futures dip, Nikkei futures point to drop

By Wayne Cole

SYDNEY, Feb 10 (Reuters) - Wall Street share futures

fell and the dollar rose broadly on Monday after U.S. President

Donald Trump repeated warnings of imminent tariffs including on

steel and aluminium, an inflationary move that could limit the

scope for rate cuts.

Speaking to reporters on Air Force One, Trump said he would

announce on Monday 25% tariffs on all steel and aluminium

imports into the U.S., and reveal other reciprocal tariffs on

Tuesday or Wednesday.

The comments came just after German Chancellor Olaf Scholz

said the European Union was ready to respond "within an hour" if

the U.S. levied tariffs on European goods, highlighting the

risks of an escalating trade war.

China's retaliatory tariffs on some U.S. exports are due to

take effect on Monday, with no sign as yet of progress between

Beijing and Washington.

Analysts assume currencies from those countries targeted by

Trump will tend to fall against the dollar to help compensate in

part for the taxes, keeping their exports competitive.

Tariffs could also put upward pressure on U.S. inflation and

further limit room for the Federal Reserve to ease policy.

Markets had already scaled back expected rate cuts this year

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

an 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.

His Wednesday testimony will also follow consumer price data

for January which might hint at early pressure given anecdotal

evidence of firms raising prices in anticipation of the taxes.

A survey of consumers out on Friday showed a sharp rise in

inflation expectations for the year ahead, though the

longer-term outlook was steadier.

DOLLAR UP WITH YIELDS

Investors reacted by pushing the dollar broadly higher, with

its index up 0.3% at 108.38. The euro dipped 0.3% to

$1.0295, while the trade-exposed Australian dollar

fell 0.5% to $0.6245.

The dollar was steady on the yen at 151.32, with

the Japanese currency underpinned by speculation the Bank of

Japan will raise rates in the next few months.

Nikkei futures were trading down at 38,415, from a

cash close on Friday of 38,787.

S&P 500 futures slipped 0.2%, while Nasdaq futures

dipped 0.3%.

Shares were also roiled by some mixed earnings numbers last

week, though overall earnings per share growth is running at 12%

and above early expectations of 8%.

"Tariffs are a key downside risk to our 2025 EPS forecasts,"

warned analysts at Goldman Sachs, who estimated that the

effective U.S. tariff rate would likely rise by five percentage

points, knocking 1% to 2% off earnings per share.

"Heightened policy uncertainty represents downside risk to

valuation because it raises the equity risk premium and implies

downward pressure on fair value," they said in a note.

The risk of reigniting inflation also slugged Treasuries,

and yields on 10-year notes were at 4.495%, from

last week's low of 4.400%.

The strength of the dollar and higher yields have not

prevented gold prices from reaching record highs at $2,886 an

ounce, helped in part by talk Trump might impose tariffs

on the metal.

This has led to stepped up demand for physical gold in

London to be shipped to the U.S. to avoid any new taxes,

reflected by selling of LME gold futures to buy Comex futures.

The metal was steady at $2,860 per ounce early Monday.