Pound hits five-week high as Trump fears weaken dollar – as it happened

All the day's economic and financial news, as Donald Trump's protectionist approach alarms the markets.

• FTSE 100 heads for third day of falls
• Pound hits $1.245 in early trading
• Gold rises to two-month high

5.43pm GMT

Investors were cautious as Donald Trump made a number of moves in his first day in office as US president, including plans to renegotiate the free trade agreement with Canada and Mexico and withdraw from the Trans-Pacific Partnership. He also threatened massive border taxes on companies moving abroad and shipping goods to the US. With the dollar weakening on nervousness about Trump's protectionism and fears of a trade war, European markets were on the back foot, while Wall Street also went into decline. Jasper Lawler, senior market analyst at London Capital Group, said:

European stocks dropped whilst Wall Street opened lower on the first full working day with Donald Trump as US President. Attempts to breakout into new highs for the year have been temporarily shelved after Donald Trump opted for a protectionist, anti-establishment inauguration address. The tone at the inauguration was very different to the acceptance speech that preceded the latest rally in equities and the US dollar.

Perhaps the market was a little overdone to the upside anyway, but it isn't hard to imagine a more positive reaction should the speech have been more conciliatory. Still, there is no clear sense of capitulation in markets yet. Investors are still willing to give Donald Trump the benefit of the doubt.

5.10pm GMT

The weakness in the dollar and hopes that Donald Trump's infrastructure plans will boost demand are helping to buoy up metal prices, with copper up 0.8% on the London Metal Exchange.

In turn that has lifted mining groups, with Antofagasta rising up nearly 4% and Anglo American adding 1.5%. Precious metal miners such as Randgold Resources and Fresnillo are also in demand as investors seek havens amid the uncertainty over Trump's presidency.

5.00pm GMT

The US is set to renogiate the free trade agreement with Canada and Mexico, and our latest report is here:

Related: Trump will issue executive order to begin Nafta renegotiation, report says

4.27pm GMT

US markets could be set for further falls as the initial Trump boost fades and a possible recession looms, reckons Capital Economics. The consultancy's John Higgins said:

We think that the S&P 500 will only rise a little bit further over the next couple of years and then probably tumble as the US economy takes a turn for the worse.

Admittedly, Trump's election victory gave the index some renewed impetus. But the euphoria has died down and it is now not much higher than at the start of 2017. Indeed, the big picture is that since trebling between its post-financial crisis trough in 2009 and the end of 2014, the S&P 500 has traded in a fairly narrow range.

What's more, investors are unlikely to drive the valuation of the stock market up to an even higher level. In the past, the price/earnings multiple of the S&P 500 has tended to track a sideways path when the unemployment rate has fallen well below its natural level.

As a result, the S&P 500 has only tended to edge up on the eight occasions since 1950 when this has happened. The average gain in the index has been roughly 4% a year, about half its average over the period.

4.19pm GMT

On Wall Street the slide in the Dow Jones Industrial Average has accelerated as investors continue to express concern about the protectionist policies promoted by the new US president.

Donald Trump's meeting with US chief executives seems to have emphasised these worries. Joshua Mahony, market analyst at IG, said:

Donald Trump has wasted little time in his new role, choosing to host on open meeting with business leaders in front of the press. This meeting was clearly as much about the message it sends out to other businesses as it was about the CEOs in the room.

Trump's promise of lower taxes and better incentives for firms to remain in the US should have provided a boost for US stocks, yet with the likes of the Dow trading in the red, it is clear that markets instead focused on the protectionist aspects of the new president's plans. Trump's promise for massive import taxes on products produced abroad and shipped to the US strikes a dangerous tone, threatening to spark a trade war, hard on the heels of the currency wars of the past few years.

3.39pm GMT

Still with the confidence figures, ING economist Bert Colijn said:

Improvements in the job market seem to be outweighing concerns about political volatility among consumers for the moment. Expectations of unemployment have declined significantly over recent months and expectations of the financial situation of households have improved. While 2017 could be a year full of political risk, consumers have started it full of confidence. This is a positive sign for domestic demand growth in the first quarter, which is why we expect consumer spending to accelerate in the first quarter of 2017.

Consumers do seem to be defying some of the more negative factors influencing confidence. Besides continued high political risk, this month gasoline prices reached the highest level since August 2015, which shows that the oil price recovery continues to work through to the headline inflation numbers in January. Eurozone stock prices have also stagnated at the beginning of the year, as the Trump-rally calmed ahead of the inauguration. Higher inflation and concerns about geopolitics could impact confidence later in the quarter as gasoline prices rise further and major Europeans elections come closer, but for now consumers remain optimistic.

3.34pm GMT

The European consumer confidence figures are encouraging but the outlook may not be so positive, says Howard Archer, chief economist at IHS Markit. He said:

First survey evidence for 2017 for the Eurozone economy is encouraging - as consumer confidence rose for a fifth month running in January to reach a 21-month high. Furthermore, consumer confidence is now substantially along long-term norms. Consumers across the Eurozone currently seeming to be focusing on recent largely decent economic news and improved job markets; and, for now at least, brushing off political uncertainties.

January's further strengthening in consumer confidence buoys hopes that the Eurozone economy can get off to a decent start to 2017 after seemingly improving in the fourth quarter of 2016. We believe that Eurozone GDP growth picked up to at least 0.4% quarter-on-quarter in the fourth quarter of 2016, and could very well have reached 0.5% quarter-on-quarter. This would be up from 0.3% quarter-on-quarter in both the third and second quarters.

However, the fundamentals for Eurozone consumers could well soften overall during the coming months - particularly through higher inflation eating into purchasing power.

Much will likely depend on how well Eurozone labour markets do over the coming months.

3.17pm GMT

Over in Europe, consumer confidence improved in January to a 21 month high, but not by as much as expected.

According to the European Commission, consumer confidence in the eurozone rose by 0.2 points to -4.9, compared to expectations of a figure of -4.8. In the wider European Union it improved 0.3 points to -4.3 from December.

2.46pm GMT

With the concerns about Donald Trump's protectionist strategy heightened by the new President's inauguration speech hitting the dollar and prompting investors to seek havens, US markets have edged lower at the open.

The Dow Jones Industrial Average has dipped 13 points or 0.06% while the S&P 500 opened down 0.17% and the Nasdaq Composite 0.145.

BREAKING: Executives from Whirlpool, Under Armour, Tesla, Lockheed Martin, Johnson & Johnson and more attend Trump meeting on manufacturing

BREAKING: Trump says he is going to cut taxes massively for middle class and companies

MORE: Trump tells manufacturing executives that companies that move abroad will face major border tax on products coming into U.S.

2.12pm GMT

The UK Supreme Court is due to make its decision on Tuesday on whether MPs are entitled to have a vote on triggering Article 50, the process of leaving the EU. Whichever way the ruling goes, the pound and the markets are bound to be affected. Naeem Aslam, chief market analyst at Think Markets UK, said:

Ahead of tomorrow's Supreme Court's decision, both FTSE and sterling are the major focus for investors. If the Supreme court provides a decision which is against the government's unilateral power (triggering the article 50), we could see sterling moving higher. The reason will be that parliament will have much more to say in triggering Article 50 and most importantly, it fades the chances of Scotland prompting another referendum. Scotland can no longer play the card that the Brexit is against their will if the vote comes to the parliament. As for the FTSE, higher sterling could take some more wind out of the index.

On the flip side, if the Supreme court says that Theresa May does have a unilateral decision in activating article 50, we could see the sterling falling. Traders will perceive that Theresa May is going to achieve her "clean" Brexit without major hurdles. For the FTSE 100, lower sterling has provided ammunition for higher moves.

1.49pm GMT

Time for a quick catch-up, and the latest reaction to today's developments.

Global stocks traded lower on Monday as the Trump fueled uncertainties, rising political risks, and overall market jitters dented investors risk appetite.

Asian shares failed to maintain gains while the risk-off sentiment sent European markets into the red territory.

While President Trump's 'too strong' dollar comment and combative inaugural address has taken some of the steam out of the greenback's rally, we remain wary that dollar strength could be the ultimate by-product of the new President's 'America First' policy stance. Indeed, the updated White House pages show that 25 million new jobs and 4% GDP growth remain the economic pledges of the Trump administration. With a US economy already close to full employment, it is difficult not to see Trump's fiscal plans generating sufficient inflationary pressures to drive US yields and the dollar higher.

But equally, investors are placing greater focus on future US trade and foreign policy. Naturally the market may be bracing itself for President Trump to formally name China a currency manipulator. In practice, this would spark bilateral negotiations rather than any immediate tariffs but presumably the market wouldn't take too kindly to this.

Having hit a fresh all-time high this time last Monday, an aggressively negative series of sessions last week, largely inspired by the pound's gains following Theresa May's Brexit speeches, has effectively wiped away the remarkable gains it managed in the first fortnight of 2017.

The FTSE still has a way to go before it dips under the key 7000 level; however, the index's rampant optimism does seem to have come to an end in conjunction with the pound beginning to peek its head above the parapet after a month or so of suffering.

1.07pm GMT

US media are reporting that Donald Trump is expected to sign an executive order today that would start the process of renegotiating the North American Free Trade Agreement (the free trade bloc of the US, Canada and Mexico).

BREAKING: Trump to sign orders as early as today to renegotiate NAFTA and pull out of TPP - @NBCNews https://t.co/wDzeDfOMZ0

Trump Executive Order to renegotiate NAFTA confuses investors who've spent last year under a rock.

12.32pm GMT

Meanwhile in Europe, protesting farmers have been spraying powdered milk at the EU council headquarters in Brussels.

"The dairy market is still stuck in a crisis. Voluntary production cuts might have led to a rise in prices, but the sale of milk powder from EU intervention stocks would, once again, put the market under pressure."

"We need a permanent crisis instrument that prevents surpluses on the dairy market and leads to long-term stability," according to the board.

Producteurs en colire : Di(C)versement de lait en poudre sur le Conseil europi(C)en (vidi(C)o) #AGRIFISH #AFP pic.twitter.com/PneWku7aai

11.58am GMT

Newsflash: Mario Draghi is now collecting the 2016 Camillo Cavour prize, awarded for his work strengthening Italy.

And the ECB president is talking about the instability currently in play in Italy and beyond, as he compares the situation today to the mid-19th century, when Camillo Benso, Count of Cavour, helped unify Italy.

#ECB DRAGHI SAYS THERE IS WIDESPREAD INSTABILITY IN ITALY, GLOBALLY - BBG

Cavour acted in a European context suddenly destabilized by the 1848 revolutions that had disrupted the balance of power established by the Congress of Vienna after the fall of Napoleon. It was a period of turbulent transition, in which for the protagonists of European politics opened large joint opportunities to large risks.

Today we are again in a historical phase in which Europe is moving, after the dissolution of the Soviet bloc, the reunification of Germany, the effects of the sovereign debt crisis in the euro area, the UK via exit ' European Union, the geopolitical tensions in Eastern Europe.

#Draghi: "International cooperation is the only way to solve problems that national states have long been unable to handle on their own" pic.twitter.com/drgkGAu2Rm

Draghi ringrazia figlio di assessore m5s per parole di apprezzamento!!
(Vedi tweet precedente)@LaStampa @alexbarbera @ecb pic.twitter.com/L3BkT00G97

11.23am GMT

ECB president Mario Draghi has just been sighted in Turin, where he'll be giving a speech at a prize-giving ceremony (in memory of Italian statesman Camillo Benso, Count of Cavour)

Draghi on the footsteps of Cavour
Santena@LaStampa @alexbarbera @ecb pic.twitter.com/jSLObmEm9J

10.55am GMT

The eurozone's total national debt has shrunk to its smallest level in four years, when measured against its total economy.

New figures from Eurostat show that the euro area national debt dropped to 90.1% of GDP in the July-September 2016 quarter, almost a whole percentage point lower than the previous three months.

Euro area government debt down to 90.1% of GDP at end Q3 2016 (91.2% in Q2 2016) #Eurostat https://t.co/FzbFl457gf pic.twitter.com/bdL0nasLPe

Euro area seasonally adjusted government deficit up to 1.7% of GDP in Q3 2016 #Eurostat https://t.co/iQnklRKsA9 pic.twitter.com/0153NzNa4X

10.27am GMT

Today's selloff means the FTSE 100 has lost virtually all the gains it made this year.

The week has started on a bearish note, with the FTSE 100 falling over 40 points in early trading. The index has lost around 3% since its peak earlier in January, although it has held the breakout line of 7130 that marked its previous high.

The steady deterioration in risk appetite over the past few days nicely bookends the post-election period, which began with such furious buying of stocks. Disappointment has set in, but it has not yet turned to disillusionment.

9.17am GMT

This chart, from the Wall Street Journal, show how market volatility has risen while money flowed out of the markets last week:

Trump trade over? Investors are turning more cautious, as President Donald Trump takes office https://t.co/IKwmCjp762 pic.twitter.com/ERL4TaaveH

9.09am GMT

City investors are disappointed that Trump's inauguration speech contained little detail on fiscal policy, tax cuts and infrastructure spending.

As Kit Juckes of French Bank Societe Generale puts it:

Instead, the message was combative, protectionist and isolationist, while the media focus was on the size of crowds and the women's movement marches in the US and elsewhere.

Related: Trump's inauguration crowd: Sean Spicer's claims versus the evidence

8.55am GMT

London's stock market has opened in the red.

The FTSE 100 has dropped by 64 points, or 0.9%, to 7134 points. That's partly due to the strength of the pound (which will hurt exporters, and make UK shares more expensive for foreign investors to buy).

So far the new president has stoked protectionism but offered little detail on the good stuff - pro-growth infrastructure spending, stimulus etc. That's ensuring the dollar starts the week on the back foot, trading at its weakest since early December.

Gold is trading at a two-month high as safe haven assets are bid.

8.32am GMT

The dollar is down 0.5% against other currencies this morning.

RBC Capital Markets blame:

...the lack of economic policy detail in President Trump's inauguration speech coupled with concerns over his potential protectionist stance.

8.27am GMT

8.20am GMT

Donald Trump's protectionist rhetoric is driving down the US dollar this morning.

The greenback is in retreat against most major currencies, sending the British pound up 0.75 of a cent to $1.245. That's its highest level since 19 December.

US Dollar lower as gold, yen and UST 10yr futures rise in tandem. Looks like risk aversion to open the trading week.

After the "joyless rant" of Trump's inauguration speech on Friday (to paraphrase Simon Schama, writing in the FT at the weekend), the world is watching to see what will be included in the rush of executive orders that are forecast to come in the coming days.

This will hopefully give us an idea if Trump has a coherent set of views that could be considered a plausible economic policy.

8.08am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

With the lack of a clear policy direction from Trump, the market movement is a sign that risk aversion is back on the table, OCBC analyst Barnabas Gan said.

The market could witness volatility into the first 100 days of the Trump administration, he added.

Good morning from Berlin. Asia stock markets start mixed to the week as Trump's America First speech weighing. Dollar drops while Gold rises pic.twitter.com/cp7LiweWQ4