San Francisco Frontiers - Stocks recover but US tariff threats keep gains in check

The hesitant trading came after heavy selling Monday following Trump's weekend announcement of the tariffs, before later offering a reprieve for the United States' closest neighbours.

Oil prices also clawed back early losses seen after Beijing announced retaliatory tariffs against US products, including hydrocarbons, shortly after US levies came into force on Tuesday.

"Chinese imports of US crude and oil products are relatively modest," Jorge Leon, an economist at Rystad Energy, told AFP.

"However, the key question is where we go from here. Is this the start of a tit-for-tat trade war between the two biggest economies in the world? If so, the downside risk to global economic growth would be significant," he said.

Gold, a haven asset in uncertain times, traded close to recent record highs.

Investors also tracked mixed earnings from major companies -- including alcoholic drinks giant Diageo, which scrapped a key performance target as it predicted sales of tequila and Canadian whisky in the key US market would be hit by the tariffs.

In the United States, PepsiCo slumped after it reported flat quarterly sales while the soda and snacks giant worked to address "subdued" demand in North America and faced "business disruptions due to geopolitical tensions in certain international markets".

Indexes from Japan to New York were sent tumbling Monday after news at the weekend that Trump had signed off 25 percent duties against Mexico and Canada, fanning concerns for the stuttering global economy.

Hours before the tariffs were due to kick in, Trump said he would postpone the measures until March.

China, Canada and Mexico are the United States' three biggest trading partners.

"A risk is that this is the beginning of a tit-for-tat trade war, which could result in lower GDP growth everywhere, higher US inflation, a stronger dollar and upside pressure on US interest rates," said Stephen Dover, chief market strategist and head of Franklin Templeton Institute.

"The uncertainty surrounding the permanence of these tariffs makes it challenging for companies to make informed capital investment decisions," he added.

Trump has warned that the European Union would be next in the firing line and has not ruled out tariffs against Britain.

The volatile start to February on markets follows their roller-coaster ride last week after China's DeepSeek unveiled a cheaper artificial intelligence model rivalling those of US tech giants, sparking questions over the vast sums invested in the sector in recent years.

"One thing we can say for sure. Markets are going to remain subject to massive headline risk in coming hours... days... and years," forecast Ray Attrill, foreign currency strategist at National Australia Bank.

- Key figures around 1645 GMT -

New York - Dow: UP 0.1 percent at 44,484.22 points

New York - S&P 500: UP 0.7 percent at 6,034.36

New York - Nasdaq: UP 1.3 percent at 19,640.00

London - FTSE 100: DOWN 0.2 percent at 8,570.77 (close)

Paris - CAC 40: UP 0.7 percent at 7,906.40 (close)

Frankfurt - DAX: UP 0.4 percent at 21,505.70 (close)

Tokyo - Nikkei 225: UP 0.7 percent at 38,798.37 (close)

Hong Kong - Hang Seng Index: UP 2.8 percent at 20,789.96 (close)

Shanghai - Composite: Closed for a holiday

Euro/dollar: UP at $1.0385 from $1.0302 on Monday

Pound/dollar: UP at $1.2488 from $1.2407

Dollar/yen: DOWN at 154.55 yen from 154.80 yen

Euro/pound: UP at 83.17 pence from 83.03 pence

West Texas Intermediate: DOWN 0.4 percent at $72.76 per barrel

Brent North Sea Crude: UP 0.2 percent at $76.19 per barrel

H.Reyes--SFF