(MENAFN) Global financial markets remained volatile on Tuesday as investors reacted to fresh tariff threats from U.S. President Donald Trump, aimed at China over its rare earth export restrictions. Despite the heightened tension, Trump attempted to calm fears, writing in a social media post: "Don't worry about China" and "it will all be fine" — remarks that helped ease risk sentiment.

Trump initially declared that China would face a 100% tariff on top of existing tariffs beginning Nov. 1, intensifying trade friction. However, his subsequent softer tone helped lift sentiment across equity markets.

Attention is now turning to upcoming remarks from Federal Reserve policymakers, with investors parsing potential shifts in monetary policy. Philadelphia Fed President Anna Paulson indicated a more cautious approach may be emerging, saying the focus should be on "balancing the risks between maximizing employment and ensuring price stability" — a signal that the central bank could move toward a neutral stance.

Meanwhile, earnings season is expected to play a pivotal role in shaping market direction, according to analysts.

Gold prices soared to a record $4,179.98 per ounce, driven in part by ongoing concerns surrounding the U.S. federal government shutdown. The metal was last trading at $4,132.18, up 0.5% from the previous close.

In other key market indicators, the 10-Year U.S. Treasury yield stood steady at 4.04%, while the U.S. Dollar Index dipped 0.3% to 99.1. Brent crude oil slipped 0.2% to $63.1 per barrel.

In equities, Wall Street responded positively to Trump’s more tempered rhetoric. The Dow Jones closed up 1.29%, the S&P 500 climbed 1.56%, and the Nasdaq surged 2.21%. However, U.S. stock futures began Tuesday in negative territory.

Among corporate movers, JPMorgan Chase announced plans to invest up to $10 billion in support of key sectors and national security, sending its stock up 2.4%.

Broadcom shares jumped 10% after the semiconductor company revealed a partnership with ChatGPT-maker OpenAI.

In Europe, optimism grew on Monday amid signs that U.S.-China trade tensions may cool, alongside fading geopolitical risks in the Middle East. This boosted risk appetite, pushing the FTSE 100 up 0.16%, DAX 40 up 0.6%, CAC 40 up 0.21%, and FTSE MIB 30 up 0.29%. However, European markets opened Tuesday in negative territory.

Investors are closely watching an anticipated address by Bank of England Governor Andrew Bailey, scheduled for later Tuesday.

Asian markets, meanwhile, traded lower amid escalating U.S.-China tensions and renewed political instability in Japan. Last week, nationalist politician Sanae Takaichi was elected leader of Japan’s right-wing Liberal Democratic Party (LDP), putting her in line to become the country’s first female prime minister.

The LDP’s decision to end its 26-year alliance with the Buddhist-backed centrist Komeito party has disrupted the ruling coalition, complicating Takaichi’s path to leadership.

In response to the political uncertainty, the Nikkei 225 fell 1.2%, Hang Seng Index slipped 0.2%, and the Kospi Index dropped 1.2%. The Shanghai Composite Index remained flat.

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