United States
Hopes for negotiations on US tariffs with major trading allies, which had previously boosted US markets, were dashed when the US administration confirmed a 50% increase in tariffs on China, bringing the cumulative total to 104% starting at midnight on Wednesday (US time). Investors had been buoyed by tweets from President Trump, who mentioned having had a good meeting with the acting president of South Korea, as well as reports that US trade officials were meeting with allies for talks.
By the end of the day, the Dow Jones Industrial Average had fallen 320 points, closing at 37,645, a decline of 0.84%. The S&P 500 dropped 1.57%, losing 80 points to end at 4,982.77. Every sector of the index saw losses, with materials and consumer discretionary stocks performing the worst. The Nasdaq Composite fell 335 points, down 2.15%, to close at 15,267.91.
The selloff primarily affected companies with exposure to China and global growth. Apple, which manufactures most of its products in Asia, dropped 4.98% to $172.42, marking a 23% decline over the past four trading days. Tesla shares fell 4.90%, closing at $221.86, amid a public dispute between CEO Elon Musk and trade advisor Peter Navarro, who had referred to Tesla as a “car assembler” rather than a “car manufacturer.” Musk responded by calling Navarro “dangerously dumb.”
Policies announced by President Trump to ramp up coal production in the US also negatively impacted solar companies. First Solar slid 7.44%, while Enphase fell 11.19%, closing at $49.52, marking a one-year low for the stock. Technology stocks also saw declines, with Alphabet falling 1.78% and Meta (formerly Facebook) dropping 1.12% to $510.45.
The decline in industrial metals and oil prices hit suppliers of these commodities hard. Freeport-McMoRan dropped 3.82%, and oil company ConocoPhillips fell 3.51%.
Longer-dated bond yields rose on the day, with the 10-year yield increasing by 11 basis points to 4.29% and the 30-year yield rising by 14 basis points to 4.76%. The 2-year yield, however, dipped slightly by 3 basis points to 3.72%. The steepening of the US yield curve contradicts Treasury Secretary Scott Bessent’s stated goal of lowering the 10-year yield.
Looking ahead, investors will focus on data showing the initial effects of the tariff increases later in the week. The Consumer Price Index (CPI) for March will be released on Thursday, and major banks will begin reporting first-quarter results on Friday, including JP Morgan and Wells Fargo. Market participants will be keenly watching for any changes in margins, arrears, and commentary on the impact of tariffs on borrowers.
Europe
A relief rally that began in Asia extended into Europe, with continental share markets rebounding after a week of declines. The Euro Stoxx 600 climbed 2.72% to close at 486.91, with gains recorded across all industry sectors. Financials and industrials led the advance.
The UK market followed suit, as the FTSE 100 surged 2.71%. Investors responded positively to signs of conciliatory rhetoric from officials in both Europe and the UK. In Europe, discussions around proposed counter-tariffs evolved into more constructive dialogue, including the possibility of a “zero-for-zero” tariff arrangement on select goods. Meanwhile, UK Chancellor Rachel Reeves announced she would soon meet with US Treasury Secretary Bessent to explore a new economic partnership and potential tariff reductions.
Defence stocks rebounded strongly from Monday’s losses, with the sector gaining 5.1%. Rolls-Royce rose 7.6%, while Germany’s Rheinmetall added 5.75%. However, automakers lagged behind the broader market. BMW fell 2.09%, and Stellantis dropped 0.84% following announcements of reduced production in Italy and the cessation of its Chinese joint venture’s EV production in Poland. The company is now reviewing alternative manufacturing options.
Pharmaceutical stocks also rallied, with AstraZeneca rising 3.1%. The European Federation of Pharmaceutical Industries and Associations (EFPIA) warned the EU Commission that proposed US tariffs could accelerate the shift of pharmaceutical operations from Europe to the US. The lobby group called for “rapid and radical action,” including reduced regulation on clinical trials, to retain the industry within the EU.
In the financial sector, both banks and insurers posted solid gains, with insurers outperforming, climbing 4.1%.
Bond yields were relatively stable. Germany’s 10-year yield edged up by 2 basis points to 2.63%, while the UK 10-year yield slipped by 1 basis point to 4.60%.
Australia
The Australian share market rose alongside global markets as the selloff came to an end, and investors began buying perceived undervalued stocks. The ASX 200 closed the day up by 166.7 points, a 2.72% gain, finishing at 7,501.00. All 11 sectors saw gains, with technology leading the charge, up 4.63%, and energy benefiting from stable oil prices.
The technology sector saw strong performance as investors snapped up both large and mid-cap stocks. WiseTech rose by 5.03% to $80.35, and TechnologyOne (TNE) increased by 6.95% to $26.30. Broker upgrades to a “buy” rating, following TNE’s 25% drop over the last two months and a positive lead from US tech stocks, were key drivers of the buying activity.
The materials sector also experienced an unexpected rise, despite a 3% drop in iron ore prices in Asia, as concerns over potential tariffs on China from former US President Trump weighed on the market. BHP added 2.34%, closing at $35.38, while Fortescue increased by 3.49%, reaching $14.82. Gold miners also gained, with the price of gold rising back through US$3,000. Evolution Mining saw a 4.97% rise to $6.76, and De Grey Mining climbed 5.09% to $2.27. Energy companies also performed well, with Woodside increasing by 3.32% to $19.89 and Santos rising 5.40%.
In a report released by Westpac and the Melbourne Institute, consumer sentiment dropped significantly, falling by 6 percentage points to 90.1. Surveyed consumers cited global tariff announcements from the US as a key factor in their declining confidence. A separate survey conducted by NAB showed that while business conditions remained stable, business confidence had slightly decreased, staying in negative territory.
Bond yields rose as equity markets stabilized, with the 10-year bond increasing by 14 basis points to 4.24%, and the 2-year bond climbing by 6 basis points to 3.31%. Expectations for further rate cuts by the RBA are growing, with many economists now predicting a reduction of 0.75% to 1% by the end of the year.
Overnight the ASX200 futures fell sharply losing 154 points, the equivalent of 2.04%, reversing all of Tuesday’s gains. The AUDUSD also slid and will open Thursday’s trade at 0.5949 at levels last seen in 2003
Commodities
Oil prices continued their downward trajectory on Wednesday as the US moved forward with implementing 104% tariffs on China. West Texas Intermediate (WTI) dropped 3.95%, losing $2.40 to settle at $58.28. The Brent contract fell 4.03%, down $2.59 to $61.62. The main driver behind the declines was the expectation of reduced economic activity. China responded defiantly, vowing not to succumb to “blackmail” and pledging to fight to the end. Later in the day, President Trump announced plans to invoke the “Defense Production Act” to boost coal production, a move that could potentially revive the struggling industry in the US.
Gold remained largely unchanged, oscillating between slight gains and losses. The precious metal was trading at $2,982, down by $1.00. Silver saw a modest decline, falling 0.89% to $29.82.
Bitcoin continued its downward trend, trading at $77,010, down 2.4%.
The rise in tariffs on China also impacted industrial metals. Iron ore finished trading in New York at $93.70, marking a 3.9% drop. The commodity’s decline began in Asian trading and accelerated as any hopes for a delay in US sanctions against China diminished. Copper also experienced losses, falling $76 per tonne to close at $8,656, a 0.87% decline.
Economic Calendar
NZ:
- RBNZ Interest Rate Decision – 2:00pm
US:
- Wholesale Inventories (Feb) – 12:00am
- FOMC Meeting Minutes – 4:00am
This article was written by Paul Darwell, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
