United States
Volatility surged across U.S. asset classes, as equities extended their retreat, pushing the S&P 500 into correction territory—defined as a 10% drop from recent highs. The selloff, which has erased nearly $5 trillion from the benchmark index, deepened amid renewed concerns over trade tensions and economic uncertainty. President Donald Trump’s latest tariff threats against the European Union, alongside an unwavering stance on steel and aluminum duties, triggered another flight to safe-haven assets. The risk-off sentiment also saw speculative corners of the market—such as unprofitable tech stocks and most-shorted shares—experiencing steep losses.
The S&P 500 fell 1.4%, while the Nasdaq 100 declined 1.8%, dragged lower by a slump in megacap tech stocks. The Dow Jones Industrial Average dropped 1.3%, with the Bloomberg Magnificent 7 Index slipping 2.4%. High-yield bonds also saw sharp declines, with an $8 billion ETF tracking junk debt posting one of its worst losses of the year. Meanwhile, the 10-year U.S. Treasury yield fell four basis points to 4.27%, signaling growing risk aversion. A weak $22 billion auction of 30-year U.S. bonds further underscored investor concerns about long-term economic growth prospects. The dollar rose 0.1%, adding to its recent gains as global investors sought relative safety in U.S. assets.
Market strategists remain divided on the path ahead. Some warn that technical signals resemble those seen during the early 2022 downturn, suggesting further weakness, while others point to oversold conditions as a potential buying opportunity. Former Treasury Secretary Steven Mnuchin attempted to assuage recession fears, arguing that recent corrections are reasonable given elevated equity valuations. Still, investor sentiment remains fragile, with bearish positioning in equities nearing levels last seen during the 2009 financial crisis. According to Bespoke Investment Group, bearish sentiment has remained above 55% for three consecutive weeks—an occurrence rarely seen outside major financial crises.
Europe
European markets closed lower in volatile trade as Trump’s 200% tariff threat on European wine, champagne, and spirits intensified fears of a trade war escalation. The Stoxx Europe 600 Index ended down 0.2%, reversing early gains. LVMH, Pernod Ricard, and Remy Cointreau saw declines of up to 4% as the proposed levies rattled beverage producers. The auto sector also struggled, with truck manufacturers underperforming due to concerns that a rollback of U.S. environmental regulations could dampen demand for European exports.
The CAC 40 fell as concerns over French economic growth deepened, with the Bank of France downgrading its 2025 outlook. Germany’s DAX posted a modest 0.3% loss, weighed down by auto stocks and a broader cautious stance from investors. However, telecom and healthcare stocks outperformed, with Novo Nordisk rising on an analyst upgrade. Defense stocks also saw increased demand after Jefferies analysts initiated coverage on multiple companies, citing an uptick in global defense spending.
While recent U.S. market turbulence has pressured global equities, some European investors remain optimistic. Expectations for fiscal stimulus and potential monetary easing have provided a degree of support, with analysts eyeing a possible truce in Ukraine as an additional tailwind. European policymakers are also under pressure to introduce fresh measures to counteract slowing growth, with the European Central Bank facing calls to loosen monetary policy further.
Australia
Australian shares are set for a modest rebound following Wall Street’s extended decline. ASX futures indicate a seven-point gain at the open, though sentiment remains cautious as Trump’s protectionist policies continue to cloud the economic outlook. The S&P/ASX 200 closed 0.5% lower on Thursday, marking a fresh seven-month low, with investor risk appetite eroding further as global economic uncertainty weighs on equities.
Losses were broad-based, with consumer-related stocks leading the decline. JB Hi-Fi fell 1.4%, while Premier Investments dropped 2.4%. Energy stocks also tumbled, with New Hope Corporation and Whitehaven Coal declining sharply after Macquarie downgraded its outlook for coal prices. The materials sector struggled as BHP and Rio Tinto eased lower amid fluctuating iron ore prices. The major banks also faced downward pressure, with Commonwealth Bank slipping 0.6% and Westpac dropping 1.5% after a brokerage cut its price target on the lender.
Gold miners, however, provided a bright spot as safe-haven demand surged. Bellevue Gold rose nearly 6%, while Evolution Mining jumped 4%. Real estate stocks also outperformed, bucking the overall downtrend, as investors sought shelter in defensive sectors. Meanwhile, Australian 10-year bond yields edged higher to 4.41%, following similar moves in global bond markets.
Commodities
Gold surged 1.7% to $2,983.35 per ounce as market uncertainty fueled demand for safe-haven assets. Oil prices fell, with West Texas Intermediate crude sliding 1.6% to $66.57 per barrel, reflecting ongoing concerns over global growth and energy demand. Iron ore edged 1.5% higher to $102.20 per tonne as traders weighed supply constraints against demand concerns stemming from China’s property sector slowdown.
In currency markets, the Bloomberg Dollar Spot Index rose 0.1%, while the Australian dollar weakened 0.5% to US62.87¢. The euro fell 0.3% to $1.0851, and the Japanese yen strengthened 0.4% to 147.71 per dollar. Cryptocurrencies also saw losses, with Bitcoin falling 3.2% to $80,477.53 and Ether declining 2.4% to $1,845.53.
Economic Calendar
EU:
- Germany February CPI data (6:00 PM AEDT)
- France February CPI data (6:45 PM AEDT)
US:
- U.S. University of Michigan Consumer Sentiment (1:00 AM AEDT, Saturday)
- Federal Reserve, Bank of England, and Bank of Japan meetings next week
This article was written by Paul Darwell, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
