GLOBAL MARKETS-Yen surges, Wall Street off the pace as Trump trades turn

By Marc Jones

LONDON, Feb 20 (Reuters) - Traders were marking one month since Donald Trump's return to the White House and five years since COVID first rocked world markets on Thursday - and there was plenty to keep tabs on.

Record-high gold was nearing $3,000 per ounce on concerns Trump will unleash a global trade war, the yen stomped higher on bets of more BOJ interest rate hikes, while Ukraine's bonds tumbled on worries about its future.

The dollar was weakened by Federal Reserve policymakers discussing slowing or pausing the drawdown of its bloated balance sheet and a record-high Wall Street looked set to continue its underperformance against Europe and Asia later. .N

Saxo Bank's John Hardy said the day's big move was the yen's pacy rise. It briefly dropped below 150 against the dollar as it hit a more than two-month high against the buck JPY=EBS. It was also up more than 1% versus the euro EURJPY=EBS and set for its biggest daily jump since late January. /FRX

"I'm just wondering whether this is a bit of a lightbulb moment for traders," Hardy said.

Key inflation data is due in the coming days, "there is a geopolitical angle there too perhaps in that they don't want to get attention from the Trump administration for their exceedingly low policy (interest) rate."

European stocks were up again, as upbeat corporate updates in the industrial and insurance sectors offset declines in energy and healthcare stocks. .EU

Germany's DAX .GDAXI ticked up 0.3% as data there showed that producer prices rose less than expected in January.

Europe's biggest economy is also set for a snap election at the weekend, following the collapse of Chancellor Olaf Scholz's three-way coalition, with analysts anticipating a Conservative-led two-party coalition.

DICTATOR TRADE

U.S. futures pointed to a more muted open later with both the S&P 500 EScv1 and Nasdaq NQc1 pointing 0.3% lower.

Trump's latest tariff warning on Wednesday focused on pharmaceuticals, semiconductor chips and wood. He also intends to hit car imports as soon as April 2.

That along with other threats has exacerbated fears of a broad trade war, leaving investors nervous.

Ukraine's government bonds took a heavy tumble too after Trump had caused widespread alarm on Wednesday when he called Ukrainian President Volodymyr Zelenskiy a "dictator" and said he needed to move fast to secure peace or risk having no country left.

Foreign ministers from the G20 top economies were meeting in South Africa. Top U.S. officials have snubbed the gathering and media reports on Thursday said the U.S. had opposed calling out Russian aggression at a virtual G7 meeting on Monday.

Mirabaud's head of emerging market debt, Daniel Moreno, said expectations that Trump would drive a peace deal that provided Ukraine with long-term security have all but been dashed now.

"The way that things are developing (with U.S-Russia talks and Trump criticisms) the market is now realising that is not the base case anymore."

"Trump is not indicating in any form that the resolution will be a good one in any way for Ukraine," he added.

GOING FOR GOLD

In Asia, Japan's Nikkei .N225 had slid 1.25% on the strong yen, while a blistering rally in Chinese technology shares .HSTECH took a breather. .HK

Hong Kong's Hang Seng Index .HSI slipped 1.6%, having touched a four-month high earlier this week boosted by tech stocks in the wake of Chinese startup DeepSeek's breakthrough.

Gold prices showed no signs of slowing though. They rose to a fresh record high of $2,947 an ounce, reaching a new peak for the tenth time this year. The precious metal XAU= is now up 12% in 2025 after rising 27% last year, its best performance in over a decade.

Expectations that Europe's governments will now have to ramp up spending on their armies and talk of a pause in European Central Bank rates kept German Bund yields ticking higher. GVD/EUR

In the oil markets, Brent crude futures were little changed at $76 a barrel LCOc1 while wheat prices extended their gains to a fifth session, underpinned by worries that cold weather in Russia, Ukraine and the U.S. could crimp supply.