United States
Selling pressure returned to U.S. markets on Tuesday as investors exercised caution ahead of the Federal Reserve’s meeting tomorrow, where policymakers will decide on any changes to interest rates. While traders widely expect rates to remain unchanged, they will closely analyse the Fed’s summary of economic projections and accompanying commentary for future policy signals.
The S&P 500 declined 1.06%, losing 60 points to close at 5,614, with nine of the eleven sectors in negative territory. Communication services and consumer discretionary stocks were the worst performers. The Dow Jones Industrial Average fell 0.62%, dropping 260 points to 41,581, while the Nasdaq Composite was the worst-performing major index, sliding 1.71% to 17,504.12.
Market leader Nvidia held its annual conference on Tuesday, unveiling new AI-focused chips, including the Blackwell Ultra series and next-generation GPUs. However, its shares fell 3.43%, closing at $115.43. Alphabet (Google) also declined, dropping 2.20%, after announcing its $32 billion acquisition of cloud security startup Wiz—the largest deal in Google’s history, aimed at strengthening its cybersecurity capabilities.
Meanwhile, Chinese EV giant BYD introduced a new lineup of electric vehicles, claiming they can charge almost as quickly as conventional petrol cars. This news, combined with further analyst downgrades, pushed Tesla shares down 5.34% to $225.31.
Retail giants Costco and Walmart were reportedly asking Chinese suppliers to lower prices in response to U.S. tariffs. Their shares underperformed, with Costco falling 2.02% and Walmart dropping 2.13%.
Bond yields edged lower in quiet trading ahead of the Fed’s decision. The U.S. 10-year Treasury yield declined 2 basis points to 4.28%, while the 2-year yield fell 1 basis point to 4.03%. The U.S. dollar was slightly weaker, slipping 0.06% on the Bloomberg Dollar Index.
Europe
As expected, Germany has passed a new spending package into law, allocating hundreds of billions of euros toward defence and infrastructure. This news, combined with a sharp rise in the ZEW Economic Sentiment Index, helped push European shares higher on Tuesday. The Euro Stoxx 600 gained 0.61% to close at 554.30, with eight of the eleven sectors in positive territory, led by financial stocks. Germany’s DAX advanced 0.98%, while the UK’s FTSE 100 added 0.29% to reach 8,705.
Reflecting investor optimism that the increased spending will benefit the broader economy, Germany’s small-cap index has surged to levels not seen since 2022. The ZEW Economic Sentiment Index jumped from 26 points in February to a strong reading of 51.6.
Banking stocks performed well throughout the session. Spanish lender Banco Santander climbed 4% after announcing a multiyear partnership with Verizon in the U.S. to offer banking products to Verizon customers. Germany’s Commerzbank rose 3.16%, while the UK’s NatWest gained 3.61%.
European bond yields remained relatively stable. The UK’s 10-year gilt yield was unchanged at 4.64%, while Germany’s 10-year Bund yield edged down by one basis point to 2.81%. In the currency markets, the euro maintained its recent strength, rising 0.22% against the U.S. dollar to trade at 1.0946.
In late-breaking news after European markets closed, Russian President Vladimir Putin has agreed to pause strikes on Ukrainian energy infrastructure for 30 days—provided Ukraine reciprocates. While this falls short of an unconditional ceasefire, it marks the first time Russia has agreed to suspend any part of its military campaign.
Australia
The Australian equity market retreated from early gains, having been up 0.85% before closing flat on Wednesday. The ASX 200 edged up 6.3 points, or 0.08%, to finish at 7,860.40. Most sectors saw marginal movements, with eight sectors advancing and three declining. The only sector to move more than 1% was utilities, which gained 1.71%, extending its rally to 6.7% over the past week and a half.
Gold miners remained in demand as gold prices surged past the US$3,000 mark. Newmont rose 2.45% to $74.80, while West African Resources jumped 3.57% to $2.32. Among major miners, performance was mixed; however, Fortescue surrendered some of its recent gains, falling 1.71% to $16.66.
The financial sector remained unchanged, though major banks NAB and Macquarie recorded notable losses. NAB declined 1.96% to $32.59, continuing its slide following the departure of its CFO to Westpac. Macquarie dropped 2.33%, shedding $4.67 to close at $196.10. Meanwhile, insurance broker Steadfast Group gained 3.27% to reach $5.68.
Profit-taking weighed on A2 Milk after its recent strong performance, driven by Chinese government stimulus promoting birth rates. The stock fell 3.62% to $8.53.
Australian bond yields were largely stable, with the 10-year yield dipping by 1 basis point to 4.40%.
In overnight trading the ASX200 futures have fallen 51 points, the equivalent of 0.645%. The AUDUSD was marginally lower falling to 0.6361 a drop of 0.36%
Commodities
Oil prices declined on Tuesday after Russia agreed to a limited ceasefire on energy infrastructure. West Texas Intermediate (WTI) crude fell 0.99%, dropping 67 cents to settle at US$66.90, while Brent crude slipped 50 cents, or 0.69%, to US$70.57. Negative sentiment toward oil was further fuelled by an OECD report on Monday, which warned that tariffs could slow economic growth in North America, reducing oil demand as central banks keep interest rates elevated.
Gold surged to a new record high, trading at US$3,037 after a 1.23% jump. Heightened geopolitical tensions, particularly Israel’s airstrikes on Gaza, contributed to a flight to safety, further boosting demand for the metal. Increased inflows into gold ETFs by retail investors provided additional momentum. Silver also gained 0.47%, reaching US$34.02.
Bitcoin declined as risk assets weakened on Wednesday, falling 2.3% to US$82,020.
Iron ore edged lower in a quiet trading session, slipping 40 cents to US$101.05 in New York trading. Meanwhile, copper posted a 0.43% gain, rising US$43 to US$9,904 per tonne. Despite expectations of a weaker global economic outlook, copper prices continue to rally, nearing six-month highs on the LME. In the U.S., tariff concerns have kept the premium for copper elevated, with prices trading at an 11% premium to London.
Economic Calendar
AU:
- Westpac Leading Index (Feb) – 11:00am
Japan:
- BOJ Interest Rate Decision – 2:00pm
US:
- Federal Reserve Interest Rate Decision – 5:00am
- Federal Reserve Press Conference – 5:30am
This article was written by Paul Darwell, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
