FX, stocks subdued as markets assess Trump's fresh tariff talks

Indexes tracking emerging market currencies and stocks were lower on Monday after U.S. President Donald Trump's latest remarks on tariffs added to trade war worries that had somewhat abated last week.

MSCI's index tracking global EM currencies (.MIEM00000CUS) was 0.2% lower. The dollar was higher against most pairs, though the index DXY was flat.

Trump, over the weekend, said that he would announce 25% tariffs on all steel and aluminum imports into the U.S. on Monday, rattling economies who sell steel to the country including Canada, Mexico and Brazil.

This comes after last week when Trump initially ordered tariffs on Feb. 1, but gave Mexico and Canada a one-month reprieve after negotiations.

Assets in these economies were little changed in early trading on the day.

China, finding no respite, hit back with limited duties. However, Trump paused a repeal of duty-free treatment of low-cost packages from China on Friday, after the rapid change created disruptions across the e-commerce system.

Chinese stocks 000001, 3399300 closed higher, limiting declines on MSCI's stocks index CBOE:EFS.

With each Trump announcement, markets have braced themselves for possible volatility, on concerns over the impact on global trade and an uncertain outlook for emerging market assets.

"Risky assets are getting a bit desensitized to Trump's tariff announcements... Our view remains that they are a negotiating tool and will eventually be not as bad as feared," said Mohit Kumar, chief European economist at Jefferies.

"We still have a medium term positive view on risky assets, but are a bit cautious short term given the potential volatility."

Analysts also expect to see reciprocal actions from countries in terms of tariffs this week.

Meanwhile, Lebanon's international bonds rallied more than 1 cent after the country formed a new government on Saturday, a step closer to accessing reconstruction funds following a war between Israel and Hezbollah.

Trump said the U.S. was making progress with Russia to end its conflict with Ukraine. The rouble USDRUB_SPT was little changed, over-the-counter market data showed.

Israel's shekel USDILS slid to a week low after Trump reiterated his commitment to "owning Gaza."

South Africa's rand USDZAR and bonds slipped, after Trump signed an order to cut funding and new tariffs were expected to hit the mining-heavy country. Stocks SA40 were flat.

Emerging European currencies were lower against the euro, with the Polish zloty EURPLN dipping 0.3%.

Regional stock indexes were broadly higher, with ones in Romania BET and Hungary BUX up 0.4% each.

Data showed Turkey's unemployment rate dipped to 8.5% in December, while industrial output rose on a monthly basis.

Ratings agency Fitch downgraded Mozambique on Friday, on significant risks to domestic debt servicing, reflecting high financing needs, especially with U.S. halting foreign assistance.

HIGHLIGHTS:

** China's consumer inflation at 5-month high, producer deflation persists

** In China's export hub of Yiwu, traders shrug off Trump's tariffs

** Investors return to new-look Middle East, but Trump causes some concern

** Sudan to form new government after regaining Khartoum, say military sources

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