By Caroline Valetkevitch
NEW YORK (Reuters) -The euro strengthened and European stocks rose on Monday after European leaders agreed to draw up a Ukraine peace plan, while Wall Street stocks eased as U.S. President Donald Trump is expected to decide what tariffs to impose on Canada and Mexico early on Tuesday.
Bitcoin was last down about 4% after surging over the weekend as Trump raised the possibility of a new U.S. strategic reserve that would include a range of tokens.
European leaders agreed at the weekend to draft the peace plan to present to the United States, following Ukrainian President Volodymyr Zelenskiy’s clash with Trump in the Oval Office.
“That’s certainly a positive for Europe because it’s unifying more of western Europe including Ukraine and drawing a line for the Russians, who have been very transparent that they want to recreate the old Soviet Union,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.
The European acknowledgement of the need to spend more on defense sent shares in European arms makers soaring.
Reuters reported that parties in talks to form Germany’s new government are considering setting up a defense fund.
U.S. data on Monday showed manufacturing was steady in February, but a measure of prices at the factory gate jumped to a nearly three-year high and materials deliveries were taking longer, suggesting that tariffs on imports could soon hamper production.
Trump has vowed to impose 25% tariffs on all imports from Canada and Mexico, with 10% for Canadian energy. CEOs and economists say the action would set back the North American economy. The tariffs, scheduled to take effect at 12:01 a.m. EST (0501 GMT) on Tuesday, have increased uncertainty for investors.
“There’s speculation about Trump and what happens with the tariffs. Are these really going to be put through?” Ghriskey said.
The euro was last up 1.1% at $1.0489, while the dollar index, which measures the greenback against a basket of currencies, fell 0.72% to 106.54.
The pan-European STOXX 600 index was up 1.12%, with shares of companies including BAE Systems surging, while MSCI’s gauge of stocks across the globe rose 2.43 points, or 0.28%, to 865.38.
On Wall Street, the Dow Jones Industrial Average fell 108.71 points, or 0.25%, to 43,732.20, the S&P 500 slipped 16.32 points, or 0.27%, to 5,938.18 and the Nasdaq Composite dropped 89.63 points, or 0.48%, to 18,757.64.
Bitcoin rose as much as 20% from last week’s lows below $80,000 after Trump posted on Truth Social that his January executive order on digital assets would create a stockpile of currencies, including bitcoin, ether, XRP, solana and cardano.
Trump provided no detail on how the fund would work, but it was enough to revitalize the crypto bulls, who had taken a serious knock last week.
“Trump just gave the pump that crypto traders have been holding out for,” said Matt Simpson, senior market analyst at City Index.
Bitcoin was last at $90,129.
Longer-dated U.S. Treasury yields extended declines after the latest reading on manufacturing, as the tariff deadline approached.
The benchmark 10-year U.S. Treasury note yield hit 4.182%, its lowest since December 9. It was last down 3.2 basis points at 4.197%.
Also key this week will be the January U.S. payrolls report, due on Friday.
A recent spate of softer economic data has also nudged up expectations the Federal Reserve may be more active in lowering interest rates.
Markets are pricing in 65 bps in cuts by the Fed this year, up from previous bets for hikes totaling less than 50 basis points.
The European Central Bank is widely expected to cut rates when it meets on Thursday, although there is less conviction over what it might signal about the monetary policy outlook, given geopolitical factors.
U.S. crude fell 0.6% to $69.35 a barrel and Brent dropped 0.4% to $72.52 per barrel. Spot gold rose 1.07% to $2,889.12 an ounce.
(Additional reporting by Wayne Cole and Stella Qiu in Sydney; Editing by Edwina Gibbs, Emelia Sithole-Matarise, Susan Fenton and Richard Chang)
