United States
Wall Street stumbled on Friday as President Donald Trump’s nomination of Kevin Warsh to lead the Federal Reserve triggered a sharp reassessment of the monetary policy outlook, sparking the dollar’s biggest rally since May and sending precious metals into freefall.
The S&P 500 fell 0.4 per cent to 6,939, weighed down by weakness in commodity and technology shares, though the benchmark still managed to notch its best monthly performance since October. The Nasdaq 100 bore the brunt of the selling, dropping 1.3 per cent, while the Dow Jones Industrial Average shed 0.3 per cent. Small caps fared worst of all, with the Russell 2000 tumbling 1.5 per cent.
Warsh, a former Federal Reserve governor during the Ben Bernanke era, brings an unusual blend of hawkish credentials and more recent calls for lower rates to the role. If confirmed by the Senate, the 55-year-old will succeed Jerome Powell when his term ends in May. Trump said he had not asked Warsh to commit to rate cuts, though observers note the nominee publicly aligned himself with the President last year by arguing for looser policy.
The nomination initially appeared to calm concerns about Fed independence, with Warsh’s prior central banking experience seen as lending credibility to the institution. However, his stated preference for shrinking the Fed’s balance sheet raised questions about the outlook for longer-term yields, contributing to a steepening of the Treasury curve. The yield on 10-year Treasuries rose two basis points to 4.25 per cent, while 30-year yields climbed four basis points to 4.89 per cent. At the shorter end, two-year yields fell three basis points to 3.53 per cent.
The Federal Open Market Committee held rates steady earlier in the week at 3.5 to 3.75 per cent in a 10-2 vote, with officials removing language about increased downside risks to employment that had featured in recent statements.
Corporate earnings painted a mixed picture. Apple rose after delivering record quarterly sales and a better-than-expected outlook, even as the iPhone maker warned that rising component costs could squeeze margins. Oil giants Exxon Mobil and Chevron both beat profit expectations as higher production offset the impact of weaker crude prices. American Express fell after expenses related to its Platinum card refresh exceeded forecasts, while Verizon announced its largest gain in mobile subscribers since 2019 alongside a buyback of up to US$25 billion.
Europe
European equities rallied on the final trading day of January, buoyed by a string of positive earnings reports and data showing stronger economic growth, though the session ended on a sour note for miners caught up in the precious metals rout.
The Stoxx 600 gained 0.6 per cent, with banks leading the advance, climbing 1.7 per cent as HSBC reached a record closing level and CaixaBank surged 6.3 per cent following results. Technology stocks added 1.2 per cent, driven by gains in ASML, SAP and Capgemini.
Basic resources was by far the worst-performing sector, dropping 2.4 per cent as gold and silver prices retreated sharply from record highs. Rio Tinto fell 1.6 per cent and Anglo American lost 2.6 per cent, while Polish copper miner KGHM slumped 10.7 per cent after trimming dramatic weekly gains.
Consumer names had a strong session, with Swatch jumping 13 per cent on upbeat revenue trends and Adidas climbing 3.9 per cent after posting strong preliminary fourth-quarter results. Swedish appliance maker Electrolux surged 15 per cent on a significant profit beat.
Automotive stocks underperformed, with Autoliv sliding 5.4 per cent after disappointing 2026 guidance and Schaeffler dropping 7 per cent following a cautious pre-close call.
Australia
Australian shares are poised for a weak start to the week, with S&P/ASX 200 futures pointing to a fall of around 60 points, or 0.7 per cent.
The session comes ahead of Tuesday’s Reserve Bank decision, where markets have priced in a 74 per cent chance of a 25 basis point rate increase to 3.85 per cent following stronger-than-expected inflation and employment figures. It would mark the first rate rise in more than two years and represents a dramatic shift in sentiment from just two months ago, when the consensus leaned towards further easing.
Gold miners face significant pressure after bullion’s dramatic slide. Newmont dived 11.4 per cent in New York on Friday and its CHESS depositary interests dropped 8.1 per cent locally, with further weakness likely given the overnight moves. Northern Star, Perseus, Ramelius, Emerald Resources and Kingsgate Consolidated all received rating downgrades from various brokers.
Rio Tinto will be in focus after reports emerged the mining giant and Glencore are set to seek more time to work on a potential combination that would create the world’s biggest miner. The companies are reportedly wrangling over the premium Rio would need to pay.
Elsewhere, Deterra reported second-quarter royalty receipts of $62.9 million, up from $54.3 million in the prior quarter. Nine Entertainment was upgraded to positive at Evans and Partners with a $1.30 price target, while Orora was cut to underweight at JPMorgan.
Commodities and currencies
Gold experienced its biggest slide in four decades, plunging nearly 10 per cent to around US$4,894 an ounce as the rebounding dollar undercut the appeal of bullion after its record-breaking surge to above US$5,500 earlier in the week. The sharp reversal was sparked by Warsh’s nomination, with traders viewing the former Fed governor as a tougher inflation fighter likely to pursue policies supportive of the greenback.
The Bloomberg Dollar Spot Index rose 0.9 per cent as the currency strengthened against all major peers, paring its January slide. The Australian dollar tumbled 1.4 per cent to 69.50 US cents, while the euro fell 1 per cent to US$1.1849 and the Japanese yen weakened 1.1 per cent to 154.76 per dollar.
Oil steadied after recent gains, with West Texas Intermediate rising 0.6 per cent to US$65.80 a barrel. Brent crude eased 0.4 per cent to US$69.32.
Bitcoin fell 0.7 per cent to around US$83,770, extending its longest streak of monthly losses since 2019. The world’s largest cryptocurrency has dropped roughly 40 per cent from its 2025 peak, with fading demand and thinning liquidity weighing on sentiment.
Economic Calendar
US:
- S&P Global Manufacturing PMI Jan 01:45
- ISM Manufacturing Jan 02:00
EU:
- HCOB Eurozone Manufacturing PMI Jan 20:00
This article was written by Calvin Curdie, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
