UPDATE 9-Oil settles 1% lower after US data shows large builds in fuel stocks

US gasoline, distillate stocks post big weekly builds

OPEC+ supply rises weigh on sentiment

Persistent tariff tensions stalk market

New throughout, updates prices, market activity and comments

By Arathy Somasekhar

HOUSTON, June 4 (Reuters) –
Oil prices settled down just over 1% on Wednesday after U.S. data showed surprisingly large build in gasoline and diesel inventories, swelling fuel supplies with OPEC+ planning more output and trade tensions clouding the energy demand outlook.

Brent crude futures LCOc1 closed down 77 cents, or 1.2%, at $64.86 a barrel. U.S. West Texas Intermediate crude CLc1 settled 56 cents, or 0.9% lower at $62.85.

U.S. gasoline stocks swelled by 5.2 million barrels, the Energy Information Administration said. Analysts polled by Reuters had expected a rise of 600,000 barrels.

Distillate stockpiles rose by 4.2 million barrels compared with expectations for a rise of 1 million barrels.

Crude inventories dropped by 4.3 million barrels. Analysts polled by Reuters had expected a draw of 1 million barrels.

“The report is in my view bearish, due to large builds in refined products,” Giovanni Staunovo, an analyst with UBS.

“There was a strong increase in refinery demand for crude, resulting in a large crude draw. But post-Memorial Day, the strong supply increase with weaker implied demand resulted in large refined product inventory increases,” he added.

Plans by OPEC+ producers to increase output by 411,000 barrels per day (bpd) in July were also weighing on investors.

On Tuesday, both benchmarks climbed about 2% to a two-week high, driven by worries about supply disruptions and expectations that OPEC member Iran would reject a U.S. nuclear deal proposal key to easing sanctions.

Russia posted a 35% decline in May oil and gas revenue, which could make Moscow more resistant to further OPEC+ output hikes, as such moves weigh on crude prices.

On Tuesday, the Organisation for Economic Co-operation and Development (OECD) cut its global growth forecast as the fallout from Trump’s trade policies takes a bigger toll on the U.S. economy, which would in turn impact oil demand.

Meanwhile, U.S. President Donald Trump and Chinese leader Xi Jinping are likely to speak this week, days after Trump accused China of violating a deal to roll back tariffs and trade curbs.

U.S. economic activity has declined and higher tariff rates have put upward pressure on costs and prices in the weeks since Federal Reserve policymakers last met to set interest rates, the central bank said in its latest snapshot of the economy.

Geopolitical tensions continued to escalate. Russian President Vladimir Putin told Trump that he must
respond
to high-profile Ukrainian drone attacks on Russia’s nuclear-capable bomber fleet and a deadly bridge bombing that Moscow blamed on Kyiv.

“Overall, we see limited upside potential amid ongoing concerns about a supply glut and softening demand growth,” analyst Ole Hansen at Saxo Bank said in a note.

Meanwhile, production operations in Canada, some of which was shut-in due to wildfires, were restarting on Wednesday.

Canadian Natural Resources CNQ.TO said it has restarted its Jackfish 1 oil sands site in northern Alberta after determining wildfires in the region were a safe distance away.

Wildfires in Canada had reduced the country’s output by some 344,000 bpd, according to Reuters calculations on Tuesday.

(Additional reporting by Ahmad Ghaddar and Seher Dareen in London and Yuka Obayashi in Tokyo; editing by Jason Neely, Bernadette Baum, Paul Simao and David Gregorio)

((Seher.Dareen@thomsonreuters.com;))

Dollar edges down as trade tensions simmer ahead of jobs data

TOKYO – The dollar drifted lower on Wednesday as the market looked ahead to US employment data for immediate trading cues, while waiting on developments in President Donald Trump’s tariff negotiations with key trading partners including China.

The Trump administration has given a Wednesday deadline for countries to submit their best offers on trade, the same day a doubling of duties to 50% on imported steel and aluminium comes into effect.

Trump is also tipped by the White House to have a call this week with Chinese President Xi Jinping after the two sides accused each other of violating the terms of an agreement last month to roll back some tariffs.

In the meantime, macroeconomic indicators have returned as a driver of the US currency this week, even if trade frictions remain centre stage. The dollar slumped 0.8% against major peers on Monday following a contraction in manufacturing, only to rebound by almost the same amount overnight after a surprise increase in US job openings.

Early on Wednesday, the dollar was down 0.09% at 143.82 yen and the euro was up 0.13% at USD 1.1385.

The dollar index =USD, which measures the currency against those two peers and four other counterparts, was flat at 99.159.

Traders will have an eye on the ADP employment report later in the day, in the run-up to crucial US monthly payrolls figures on Friday.

“Job openings were much stronger than expected,” Commonwealth Bank of Australia analyst Joseph Capurso said of the overnight JOLTS data, which is closely watched by the Federal Reserve.

“The low estimate for ADP means the USD and US bond yields have a small hurdle to climb for a positive surprise tonight.”

Elsewhere, the Australian dollar was little changed at USD 0.6460 ahead of the release of GDP figures.

South Korea’s won strengthened about 0.2% to 1,375.25 per dollar after the victory of liberal candidate Lee Jae-myung in the country’s presidential election.

(Reporting by Kevin Buckland; Editing by Jamie Freed)

Gold falls from near four-week peak on firm dollar, traders eye Trump-Xi call

Gold fell nearly 1% on Tuesday after hitting a near four-week high, pressured by a firmer dollar as investors grew cautious ahead of a potential call between US President Donald Trump and Chinese leader Xi Jinping.

Spot gold fell 0.9% to USD 3,352.30 an ounce as of 2:26 p.m. ET (1826 GMT), after hitting its highest since May 8, earlier in the session.

US gold futures settled 0.6% lower at USD 3,377.10.

The dollar rose 0.5% from an over-a-month low hit earlier in the session, making gold costlier for foreign buyers.

“We are moving into this period that is well known to be the summer doldrums, so there’s an expectation that the gold market could fall into a bit of a lull or a sideways consolidation,” said David Meger, director of metals trading at High Ridge Futures.

Markets are on edge ahead of a likely Trump-Xi call this week, after Trump accused China of violating an agreement to roll back tariffs. The talks come as trade tensions between the world’s two largest economies continue to simmer.

Separately, the European Commission said it would push for lower US tariffs even as Trump proposed doubling duties on steel and aluminum, while Washington urged trade partners to submit revised offers by Wednesday to speed up talks.

Investors are also eyeing Friday’s US nonfarm payrolls data and a slate of Federal Reserve speakers for clues on rate policy.

US data on Tuesday showed job openings rose in April, but higher layoffs signaled a cooling labor market amid growing tariff concerns.

“I believe the Fed is ready to begin to cut rates again, but more than likely not until September … that is another factor likely to weigh on the dollar and support gold,” Meger added.

Gold, a safe-haven during times of political and economic uncertainty, tends to thrive in a low-interest-rate environment. It is up about 28% this year.

Spot silver fell 0.8% to USD 34.51 an ounce, but lingered near a seven-month peak hit in the previous session.

Continued copper strength, driven by firm Chinese demand, tight global supplies, and green energy trends, could support silver’s rally, Ole Hansen, head of commodity strategy at Saxo Bank, said in a note.

Platinum rose 0.9% to USD 1,073.14 an ounce, while palladium climbed 2.1% at USD 1,009.83.

(Reporting by Sherin Elizabeth Varghese in Bengaluru; Editing by Andrea Ricci, Vijay Kishore, and Mohammed Safi Shamsi)

Dollar holds near six-week low as trade war wears on US economy

TOKYO – The dollar fell to a six-week low on Tuesday on signs of fragility in the US economy because of damage from the trade war President Donald Trump’s administration is waging.

While global equity markets have broadly recovered in the wake of the on-again, off-again saga of Trump’s tariff threats, the greenback remains firmly on its back. Factory and jobs data in the United States in the coming days may give further signs of the toll that trade uncertainty is wreaking on the world’s biggest economy.

US duties on imported steel and aluminum are set to double to 50% starting on Wednesday, the same day the Trump administration expects countries to submit their best offers in trade negotiations.

“What this whole dynamic is basically saying is trade tensions are not really improving in that regard, and we’ve seen the dollar getting hammered widely,” said Rodrigo Catril, senior FX strategist at National Australia Bank. “Interestingly, the Aussie and the kiwi have been the good performers this time around.”

The dollar index, which measures the US currency against six major peers, was little changed after touching 98.58, the lowest since late April, when it fell to a three-year trough. The greenback was at 142.71 yen, near a one-week low.

The euro was barely changed at USD 1.1446 after briefly touching a six-week high of USD 1.1454. Later in the week, the focus will be on the European Central Bank’s interest rate decision and subsequent outlook.

New Zealand’s kiwi dollar added 0.1% to USD 0.6045, a new high for the year. The Australian dollar was little changed at USD 0.64951.

The dollar index sank 0.8% on Monday after data showed US manufacturing contracted for a third month in May and tariff snarls meant suppliers took longer to deliver goods. Attention now turns to US factory order numbers on Tuesday, along with jobs figures due later in the week.

The dollar got some respite last week, rising 0.3% after trade talks with the European Union got back on track and a US trade court blocked the bulk of Trump’s tariffs.

An appeals court reinstated the duties a day later, and Trump’s administration said it had other avenues to implement them if it loses in court.

Fiscal worries have also given rise to a broad “sell America” theme that has seen dollar assets from stocks to Treasury bonds dropping in recent months.

Those concerns come into sharp focus this week as the Senate starts considering the administration’s tax cut and spending bill, estimated to add USD 3.8 trillion to the federal government’s USD 36.2 trillion in debt over the next decade.

(Reporting by Rocky Swift; Editing by Christian Schmollinger)

Oil rises on Iran, Russia and Canada supply concerns

Oil prices rose in early Asia trade on Tuesday on concerns about supply, with Iran set to reject a US nuclear deal proposal that would be key to easing sanctions on the major oil producer, and with production in Canada hit by wildfires.

Brent crude futures gained 55 cents, or 0.85%, to USD 65.18 a barrel by 0000 GMT. US West Texas Intermediate crude was up 59 cents, or 0.94%, to USD 63.11 a barrel, after rising around 1% earlier in the session.

Both contracts gained nearly 3% in the previous session after OPEC+ agreed to keep output increases in July at 411,000 barrels per day, which was less than some in the market had feared and the same hike as in the previous two months.

Geopolitical tensions supported prices on Tuesday. Iran was poised to reject a US proposal to end a decades-old nuclear dispute, an Iranian diplomat said on Monday, saying it fails to address Tehran’s interests or soften Washington’s stance on uranium enrichment.

If nuclear talks between the US and Iran fail, it could mean continued sanctions on Iran, which would limit Iranian supply and be supportive of oil prices.

The ongoing conflict between Russia and Ukraine continued to stoke supply concerns and geopolitical risk premiums.

Adding to supply worries, a wildfire in the province of Alberta in Canada has prompted a temporary shutdown of some oil and gas production, which could reduce supply.

According to Reuters calculations, wildfires in Canada have affected more than 344,000 bpd of oil sands production, or about 7% of the country’s overall crude oil output.

The big jump in oil prices on Monday mostly reflected relief that the Organization of the Petroleum Exporting Countries and allies, including Russia, did not go ahead with a larger production hike than in the previous two months.

“With the worst fears not panning out, investors unwound their bearish positions they had built prior to the weekend’s meeting,” Daniel Hynes, senior commodity strategist at ANZ, said in a note.

(Reporting by Anjana Anil in Bengaluru; Editing by Sonali Paul)

US yields rise after latest tariff threat, data

NEW YORK – Longer-dated Treasury yields climbed on Monday after the latest tariff announcement from US President Donald Trump, while yields briefly pared gains after data on the manufacturing sector again showed contraction.

Trump said late on Friday he planned to increase tariffs on imported steel and aluminum to 50% from 25%, ratcheting up pressure on global steel producers and extending his trade war.

“In this environment, with the Federal Reserve on pause at this point, the economic data holding in there, the more recent big news items have been related to the deficit and then with trade, and both of those combined pushes yields higher,” said Jim Barnes, director of fixed income at Bryn Mawr Trust in Berwyn, Pennsylvania.

“If it starts to point in the other direction for the economy going downwards, then the long-end just based on where yields are today, I could see investors starting to move back in there as the economy becomes an area of concern again.”

The yield on the benchmark US 10-year Treasury note rose 4.2 basis points to 4.46% after earlier rising to 4.47% on the session.

Yields retreated slightly after the Institute for Supply Management (ISM) said its manufacturing PMI edged down to a six-month low of 48.5 last month from 48.7 in April. A reading below 50 signals contraction and it was the third straight month below that threshold.

“The tariff pause wasn’t a pause that refreshes, it’s probably because it’s not much of a pause, tariffs are still up,” said Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin.

“The pause was on the most punitive tariffs. Firms stocked up on inventory and are now destocking. The Fed may be in wait-and-see mode, but firms are just waiting, not knowing what they’ll see.”

Markets have been volatile since Trump announced a slew of tariffs on countries around the globe on April 2, only to then pause some and declare new ones.

Federal Reserve Governor Christopher Waller said on Monday, while speaking in Seoul, South Korea, that interest rate cuts remain possible later this year, even with the Trump administration’s tariffs likely to push up price pressures temporarily.

The yield on the 30-year bond rose 6.1 basis points to 4.993% after climbing to a high of 5.003%.

Economic survey data has shown expectations for higher inflation have grown as the tariffs are announced, while many Fed officials have indicated a patient approach to determine the effect the levies may be having on prices.

Federal Reserve Bank of Dallas President Lorie Logan said on Monday that inflation is still above the central bank’s target and the Fed is well-positioned to wait and be patient, with the key risk being if short-term inflation expectations become entrenched.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 51.7 basis points.

Markets are currently anticipating a cut from the Fed of at least 25 basis points likely to come at the central bank’s September meeting.

Chicago Federal Reserve Bank President Austan Goolsbee said the Fed was likely to lower rates after the uncertainty from tariff policies is cleared up.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, rose 2.7 basis points to 3.941%.

The breakeven rate on five-year US Treasury Inflation-Protected Securities (TIPS) was last at 2.393% after closing at a three-week low of 2.378% on May 30.

The 10-year TIPS breakeven rate was last at 2.344%, indicating the market sees inflation averaging about 2.3% a year for the next decade.

(Reporting by Chuck Mikolajczak; Editing by Nick Zieminski)

Dollar mixed on tariff uncertainty, headed for monthly gain against yen

NEW YORK – The dollar was mixed on Friday but on track for the first monthly gain against the Japanese yen this year as investors factored in the likelihood of trade tariffs remaining in some form, even as US President Donald Trump faces a court battle over his authority to impose them.

A federal appeals court temporarily reinstated the most sweeping of Trump’s tariffs on Thursday, a day after a US trade court ruled that Trump had exceeded his authority in imposing the duties and ordered an immediate block on them.

While the exact level of tariffs that will remain on trading partners is unknown, traders expect the levies to persist in some form.

“We’re going to have some tariffing. Maybe not as exciting as was announced on April the 2nd, but we’re still going to get it,” said Steve Englander, head of global G10 FX research and North America macro strategy at Standard Chartered Bank NY Branch.

“The one thing that the court ruling may have done is limited the amount of shocks that Trump can unleash with a headline or with a comment at a press conference,” Englander said.

White House trade adviser Peter Navarro said on Thursday that the Trump administration will seek to enact tariffs through other means if it ultimately loses the court fights over its trade policy.

Investors are concerned that tariffs will slow growth and reignite inflation, though deals to drop tariff increases on China and the European Union as they negotiate trading terms have reduced pessimism over the US economic outlook.

The dollar briefly bounced on Friday after Trump said that China had violated an agreement on tariffs with the United States. A day earlier, Treasury Secretary Scott Bessent said that trade talks between the US and China were “a bit stalled.”

Trump later on Friday said he will speak to China’s President Xi Jinping and hopefully work out their differences on trade and tariffs.

Tariffs are seen as a key source of revenue as Congress works on a bill to reduce some income taxes.

The dollar showed little reaction to data on Friday showing that US consumer spending increased marginally in April as a rush to beat higher prices from import duties slowed, while inflation eased during the month.

A separate report showed that the US trade deficit in goods narrowed sharply in April as the boost from the front-running of imports ahead of tariffs faded.

“Nothing in the data was such a clear surprise relative to expectations that would generate a definitive market move,” said Englander.

May’s jobs report due for release next Friday will be closely watched for any indications that the labor market is weakening, after data on Thursday showed a bigger-than-expected jump in jobless claims in the latest week.

“Further USD weakness needs weaker data,” Bank of America analysts Athanasios Vamvakidis and Claudio Piron said in a report on Friday.

“If somehow the US economy keeps defying gravity, we would expect investors to start ignoring the policy noise and go back to buying US assets, supporting the USD; US exceptionalism would be back. However, if the US economy has a proper landing, we would expect the USD to weaken further to new lows for the year,” they said.

The euro was last down 0.12% at USD 1.1356. It is on pace for a 0.27% monthly gain, the smallest since February.

German inflation eased further in May, bringing it closer to the European Central Bank’s 2% target and bolstering the case for an interest rate cut next week.

The dollar weakened 0.21% to 143.88 Japanese yen. The greenback is on track for a monthly increase of 0.6% against the Japanese currency, the first green month since December.

Core inflation in Japan’s capital hit a more than two-year high on persistent rises in food costs, data showed on Friday, keeping the central bank under pressure to hike interest rates further.

(Reporting by Karen Brettell. Additional reporting by Johann M Cherian in Singapore and Linda Pasquini in Gdansk. Editing by Mark Heinrich, Mark Potter, and Nia Williams)

Jobs data, tax bill, trade on tap for rebounding US stocks

NEW YORK – Key US economic data, developments with federal tax-and-spending legislation and twists and turns on trade all are poised to influence equities in the coming week, with the US market closing in on record highs.

The S&P 500 ended on Friday with a weekly gain and less than 4% from its February all-time high. The benchmark index rose about 6.2% in May, while the Nasdaq Composite surged 9.6%, with both indexes tallying their biggest monthly increases since November 2023.

Investors at the end of the week were grappling with implications from legal rulings involving efforts to block most of President Donald Trump’s tariffs. Trump’s trade war has whipsawed global markets for weeks on concerns about economic fallout.

The coming week also brings a raft of economic and labor market data, headlined by the monthly US employment report out on Friday.

“Now that we’re back up here not all that far from the record high, I think the hard data needs to hold in better than the market expects to really advance from here,” said Scott Wren, senior global market strategist at the Wells Fargo Investment Institute.

The employment report for May is expected to show an increase of 130,000 jobs, according to a Reuters poll of economists, which would be a step down from growth of 177,000 the prior month.

Investors have been eager to learn how Trump’s tariffs may be rippling through the economy, especially in the wake of his April 2 “Liberation Day” announcement of sweeping levies on imports.

The May data represents a full month of “how businesses have been handling some of the tariff uncertainty and some of the pressures in the market,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial.

Still, an overly strong employment report, such as growth of over 200,000 jobs, might be viewed warily by the market because it could delay interest rate cuts by the Federal Reserve, said Eric Kuby, chief investment officer at North Star Investment Management Corp.

Investors have reduced bets in recent weeks on the amount of expected Fed easing this year, with about two rate cuts priced in by December, according to LSEG data.

Minutes of their latest meeting released this week showed Fed officials acknowledged they could face “difficult tradeoffs” in coming months with rising inflation alongside rising unemployment.

Fiscal legislation in Washington will also be in focus. The Senate will start considering a tax-and-spending bill passed earlier this month by the House of Representatives. Trump said this week he plans to negotiate aspects of the “big, beautiful” tax bill, a day after billionaire Elon Musk said the bill detracts from efforts to reduce the US budget deficit.

The bill, which will add an estimated USD 3.8 trillion to the federal government’s USD 36.2 trillion in debt over the next decade, has focused attention on the impact of increasing deficits on the Treasury market. Rising bond yields have pressured stocks in recent weeks.

The shifting tariff backdrop also appeared likely to influence asset prices. Equities rebounded in recent weeks after Trump eased his harshest tariffs, but the situation remains in flux as Washington negotiates with trading partners.

On Thursday, for instance, stocks rose early the session after a US trade court blocked many of Trump’s tariffs, but gains faded during the session. Later, a federal appeals court reinstated the tariffs, further muddying the backdrop.

“There’s initial excitement and then the reality set in that this is just another step in this process and it really hasn’t clarified very much,” Kuby said.

(Reporting by Lewis Krauskopf; Editing by Alden Bentley and David Gregorio)

Japan’s Nikkei ends lower as court battle over US tariffs weighs

TOKYO – Japan’s Nikkei share price average ended lower on Friday, weighed down by uncertainty surrounding a court battle about US President Donald Trump’s tariffs as well as a stronger yen which hurt exporters.

The Nikkei index fell 1.22% to close at 37,965.1, having ended the previous trading session at its highest point in more than two weeks. It rose 2.17% over the week.

The broader Topix fell 0.37% to 2,801.57 and rose 2.41% for the week.

“Japanese shares rose yesterday on expectations that the impact of Trump’s tariffs on the global economy would be eased, but that positive mood was erased overnight,” said market analyst Shuutarou Yasuda at Tokai Tokyo Intelligence Laboratory.

A federal appeals court temporarily reinstated the most sweeping of Trump’s tariffs on Thursday, a day after a trade court ruled that the president had exceeded his authority in imposing the duties and ordered an immediate block on them.

The US dollar fell following the news, pushing the yen as high as 143.45 on Friday.

Strong inflation data on Friday for Japan’s capital also helped the yen to strengthen, strategists said.

Automakers fell, with Nissan Motor and Honda Motor slipping 3.13% and 1.87%, respectively. Toyota Motor erased early loss to end 1.26% higher.

A stronger yen typically weighs on exporter shares by reducing the value of overseas earnings when converted back into Japanese currency.

Chip-related shares fell, with Advantest and Tokyo Electron down 3.61% and 4.76% respectively, to drag on the Nikkei the most.

Bucking the trend, drugmakers rose, with Otsuka Holdings jumping 6.82% to provide the biggest support for the Nikkei.

Of more than 1,600 stocks trading on the Tokyo Stock Exchange’s prime market, 57% rose, 38% fell and 3% were flat.

(Reporting by Junko Fujita; Editing by Christopher Cushing)

Wall Street fears foreign tax in budget bill may reduce allure of US assets

NEW YORK/LONDON – Wall Street analysts are cautioning that a tax targeting foreign investors in the US budget bill progressing through Congress could end up weighing on demand for US Treasuries and the dollar.

The US House of Representatives has approved a sweeping tax and spending bill that includes the possibility of imposing a progressive tax burden of up to 20% on foreign investors’ passive income, such as dividends and royalties.

The levy, included in section 899, would be paid by entities such as sovereign funds and companies with businesses in the US or individuals from countries that impose taxes the US considers unfair, including digital service taxes.

“We see this legislation as creating the scope for the US administration to transform a trade war into a capital war if it so wishes,” George Saravelos, head of FX research at Deutsche Bank, said in a note on Thursday, adding the new tax could have an adverse impact on demand for US Treasuries.

If passed by the Senate, the rising tax rate on foreigners’ investments would come at a time global investors have started to question so-called “US exceptionalism,” or its unique ability to outperform other financial markets, due to a growing fiscal deficit and a new trade policy based on tariffs.

Financial services firm Brown Brothers Harriman (BBH) said in a note the new tax rate was “playing with fire.”

“It would deter foreign investment in US assets at a time when the country faces increasing reliance on foreign capital to finance its ballooning debt. Clearly, this is not good for the dollar,” said Elias Haddad, BBH’s senior markets strategist.

If it is also approved by the Senate, it could raise USD 116 billion in taxes over 10 years, the Congressional Budget Office said, based on estimates produced by the Joint Committee on Taxation. Still, revenues would be nearly flat in 2032 and the provision could turn into losses in 2033 and 2034, according to the calculations.

Nomura said there would likely be a push back against the new tax rate or negotiations to seek exemptions for Treasuries and agency mortgage-backed securities, as the bank considers the burden on overseas investors could have unintended consequences for those assets.

Rajeev Thakkar, chief investment officer and director at PPFAS Mutual Fund, said an increase in tax rates on investors “may reduce their appetite somewhat.”

DOLLAR WEAKNESS

Geoff Yu, EMEA macro strategist at BNY in London, said that based on his observation of investor flows, there had not been an immediate reaction.

“Treasuries are offering value right now – you’re getting higher yields, the dollar is weaker,” he said, which are both compensating for other factors.

US 10-year Treasury yields are trading at around 4.4%.

Others noted a more bearish longer-term outlook for US markets.

Morgan Stanley said in a note that the new tax would weaken the dollar, as it would reduce foreign appetite for US assets.

The US currency is down roughly 8% this year against a basket of other major currencies and is on track for its worst year since 2017.

According to law firm Davis Polk, nations that could be considered “discriminatory foreign countries” include many that are part of the European Union, as well as India, Brazil, Australia and the United Kingdom.

International companies with subsidiaries in the US, which employ 8.4 million workers, also fear the higher tax burden could make it more difficult to operate in the world’s biggest economy. In a recent statement, the Global Business Alliance, which represents foreign companies in the US, said a tax hike would threaten investments in the country.

The White House did not immediately comment on the impact of the new tax burden.

(Reporting by Carolina Mandl in New York; Additional reporting by Elisa Martinuzzi and Dhara Ranasinghe in London, Lewis Krauskopf in New York, Jaspreet Singh Kalra in Mumbai; Editing by Sonali Paul, Rachna Uppal, Mark Potter, and David Gregorio)

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