Taco Thursday: European and US stocks rise after Trump ‘chickens out’ over tariffs

Market Reaction - European and US markets experienced gains following Donald Trump's cancellation of planned tariffs on eight European countries, indicating a positive market sentiment referred to as the "Trump Always Chickens Out" (Taco) trade [1][5] - Germany's Dax rose by 1.28%, France's Cac 40 increased by just under 1%, and the pan-European Stoxx 600 was up 1.1%, while the UK's FTSE 100 saw a modest increase of 0.12% [2] - In the US, the Dow Jones industrial average climbed 0.6%, the S&P 500 rose 0.55%, and the Nasdaq increased by approximately 0.91% [2] Tariff Cancellation Details - The rise in European stock markets marked the first increase of the week, following Trump's earlier announcement of tariffs targeting Germany, France, the UK, Denmark, Sweden, the Netherlands, Norway, and Finland, set to begin on February 1 until a deal was reached regarding the US purchasing Greenland [3][4] - Trump retracted his military threat regarding Greenland and announced the tariff cancellation after claiming to have reached an unspecified agreement with NATO Secretary General Mark Rutte [4] Analyst Insights - Richard Hunter from Interactive Investor described the market's reaction as a return of the Taco trade, with global stock markets having fallen earlier in the week but rebounding on Wednesday [5] - Neil Wilson from Saxo noted that the market's buoyancy was due to the reduced threat of a trade war, while Jim Reid from Deutsche Bank characterized the market movements as a "big relief rally" as investors adjusted their expectations [5] Economic Indicators - Despite the positive market movements, Reid pointed out that the S&P 500 and the US dollar remained weaker compared to their levels on the previous Friday [6] - The US dollar was stable against the euro and the pound, with one euro valued at $1.1689 and one pound at $1.3427 [7] - Gold prices remained flat at $4,833 per troy ounce, close to record highs, as investors sought safe-haven assets amid uncertainties regarding US assets [7]