United States
Wall Street closed the week on an upbeat note, but the mood soured quickly after the White House responded to a landmark Supreme Court defeat by raising the stakes in its global trade war.
The S&P 500 added 0.7% on Friday, notching its best week since January 9, while the Dow Jones Industrial Average rose 0.5% and the Magnificent Seven index climbed 1.6%. Stocks initially rallied after the Supreme Court struck down President Donald Trump’s sweeping tariffs imposed under the International Emergency Economic Powers Act, delivering the biggest legal blow of his second term.
But the celebrations were short-lived. Trump bypassed the ruling by invoking Section 122 of the Trade Act, imposing a 15% universal tariff on all trading partners effective Tuesday. The president told reporters the court had merely overruled the use of one particular authority and that he would “go in a different direction, probably the direction I should have gone the first time.”
Treasury Secretary Scott Bessent moved to reassure markets, claiming tariff revenue would be “virtually unchanged” in 2026 and that the administration would lean on other congressional authorities, including Sections 232, 301 and 338, to maintain its trade agenda. Thousands of companies and importers are now expected to launch what could be a prolonged legal battle to recoup as much as $US170 billion in tariffs already paid.
Adding to the uncertainty, data released on Friday showed the US economy grew at a weaker-than-expected pace in the fourth quarter of 2025, while the Federal Reserve’s preferred measure of underlying inflation rose at its fastest clip in nearly a year. Bond markets were relatively contained, with the 10-year Treasury yield edging up two basis points to 4.08%. The dollar slipped 0.2%.
On the corporate front, cybersecurity software stocks took a hit after Anthropic introduced a new security feature into its Claude AI model, raising fresh concerns about disruption in the sector. Paramount Skydance said it faces no regulatory impediment in the US to completing its proposed $US77.9 billion acquisition of Warner Bros. Discovery.
Europe
European equities surged to a fresh all-time high as the Supreme Court ruling initially lifted sentiment across the continent.
The Stoxx 600 rallied as much as 1.1% before settling at a gain of 0.8% by the close, marking its fourth consecutive weekly advance. Tariff-sensitive luxury goods makers led the charge, with LVMH and Hermes among the strongest performers as traders bet that the legal defeat would ease pressure on European exporters.
The benchmark also received a lift from better-than-expected eurozone business activity data, with a surprise return to growth in Germany providing encouragement that the bloc’s largest economy may be finding its footing.
Earnings season continued to deliver positive surprises. Air Liquide climbed 4.8% after the French industrial gas producer reported second-half results ahead of expectations and lifted its dividend, while Italian luxury outerwear maker Moncler surged 15% on figures that Barclays described as significantly above estimates. Across the broader market, MSCI Europe companies have posted a 3.7% increase in fourth-quarter profits, well ahead of the 1.3% gain analysts had pencilled in.
However, the optimism may prove fragile. Trump’s decision to impose 15% universal tariffs threatens to derail nascent US-EU trade negotiations and raises the prospect of retaliatory measures from Brussels. Geopolitical risks also linger, with Trump saying he is considering a limited military strike on Iran.
Australia
The local sharemarket is bracing for a turbulent start to the week after Trump’s tariff escalation upended what had been shaping as a modestly positive open.
S&P/ASX 200 futures had originally pointed to a small gain of 0.2%, or 16 points, on Monday before the new levies were announced. Australia, previously facing a 10% tax on exports to the US, will see that jump to 15% from Tuesday.
The escalation arrives at the worst possible time, with reporting season entering its final frantic week. JPMorgan equity strategist Jason Steed noted that more than a third of companies reporting this month have experienced extreme share price swings, far exceeding historical norms. Monday’s heavy hitters include Ampol, Lendlease and NIB, while Nvidia’s earnings on Wednesday (Thursday AEDT) loom as a key catalyst for the global technology sector.
On Friday, the S&P/ASX 200 slipped 4.8 points to 9081.4, though it still managed a 1.8% gain for the week on the back of broadly solid corporate results. QBE was a standout, surging 7.1% after reporting a 21% jump in full-year net profit to $US2.16 billion. At the other end, Guzman y Gomez plunged 13.9% to a record low after delivering soft sales and a significant US loss, while Inghams Group dived 13.5% after slashing its profit guidance.
Defence contractor Austal jumped 5.5% after securing a $4 billion contract to build eight landing craft for the Australian Defence Force, and Telix Pharmaceuticals rallied 14.5% on revenue guidance that topped expectations.
Wednesday’s monthly consumer price index data for January will also command attention, with analysts forecasting headline inflation to ease slightly to 3.7% from 3.8%, still well above the RBA’s 2.5% target. Traders are pricing a 76% chance of another rate rise to 4.1% in May.
Commodities and currencies
Oil prices climbed to $US67 a barrel as tensions between Washington and Tehran continued to escalate, with the White House ordering additional troops to the Middle East. AMP chief economist Shane Oliver warned a strike on Iran could push crude past $US100, potentially adding more than 40 cents a litre to Australian petrol prices.
Gold extended its remarkable run, rising 1.9% to $US5,092.27 an ounce as investors sought shelter from the mounting uncertainty.
The Australian dollar, which had been riding a golden streak of five consecutive weekly gains to a three-year high of US71.47 cents, now faces a significant headwind from the tariff escalation. National Australia Bank’s head of FX strategy Ray Attrill described the new levies as unequivocally negative for the local currency.
The euro edged up 0.2% to $US1.1791, while the Japanese yen held steady at 154.98 per dollar. Bitcoin gained 1.2% to $US67,670.
Economic Calendar
US:
- Chicago Fed National Acitivity Index 00:30
- Durable Goods Orders 02:00
This article was written by Calvin Curdie, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
