United States
Wall Street faced renewed volatility overnight as concerns over escalating trade tensions overshadowed stronger-than-expected housing and employment data. The S&P 500 slipped 0.2%, reversing part of the previous session’s rally that was fuelled by the Federal Reserve’s decision to keep rates steady. The Nasdaq 100 lost 0.3%, while the Dow Jones Industrial Average fluctuated before closing little changed.
Investors remain cautious ahead of Friday’s massive $4.5 trillion options expiry event, known as triple witching, which has historically driven market turbulence. Despite the market’s recent rebound, analysts suggest further volatility is likely. “While the bottom of the recent correction is likely in, we probably haven’t seen the end of volatility,” said Daniel Skelly of Morgan Stanley Wealth Management.
Tech stocks showed mixed performance, with Apple declining, while Nvidia advanced. Homebuilder stocks edged higher following a robust reading on existing home sales, which bolstered confidence in the US housing sector. Meanwhile, 10-year Treasury yields held steady at 4.24%, and the US dollar strengthened 0.3% against a basket of major currencies.
Federal Reserve Chair Jerome Powell downplayed fears of a trade-driven inflation spike, though uncertainty remains regarding President Donald Trump’s proposed “reciprocal” tariffs. The administration has yet to clarify specific measures, leaving investors wary of potential economic disruptions.
Europe
European equities halted a four-day rally as concerns over new US tariffs dampened sentiment. The Stoxx Europe 600 fell 0.4%, led lower by declines in defence and banking stocks. The UK’s FTSE 100 remained in negative territory after the Bank of England opted to keep rates unchanged.
European Central Bank President Christine Lagarde warned that US tariffs could weigh on regional growth but provided no firm guidance on future interest rate moves. Meanwhile, the Swiss National Bank cut rates in an effort to deter capital inflows into the franc, a move that helped the SMI Index outperform the broader European market.
Among individual stocks, French food services company Sodexo slumped 17% after cutting its full-year guidance due to slowing US demand. German utility giant RWE AG also declined, shedding 4.6% after announcing plans to slash €10 billion from its green energy investment program.
Despite recent market weakness, European equities continue to outperform their US counterparts, with the Stoxx 600 up 8.9% year to date. German stocks have been particularly strong, buoyed by a landmark spending package designed to support defence and infrastructure projects.
Australia
Australian shares are set to open lower, with ASX 200 futures pointing to an 18-point (0.2%) decline following Wall Street’s mixed session. The local market had previously notched its best day in six weeks, surging 1.2% on renewed optimism for US rate cuts and stronger consumer sentiment.
Tech stocks led the charge, with WiseTech climbing 2.5% to $84.89 and TechnologyOne rising 3% to $28.50. Banks also rallied, with Commonwealth Bank up 2.2% to $145.93 and Macquarie surging 3.8% to $201.79. However, the resource sector lagged, as iron ore prices hovered just above the crucial US$100 per tonne level. Fortescue tumbled 3.3% to $15.94, while BHP fell 1.1% to $39.13.
A surprise 52,800-job decline in Australian employment strengthened expectations for a Reserve Bank rate cut in May, with market pricing now reflecting a 78% chance of a cut to 3.85%. Property stocks benefited from these expectations, with Goodman Group rising 2.8% and Scentre Group adding 2.5%.
VanEck portfolio manager Cameron McCormack cautioned that market sentiment remains fragile. “We are seeing uncertainty transposed onto equity markets, and until we have more clarity [on tariffs], we will see more frequent volatility both up and down.”
Commodities
Commodity markets saw mixed moves as traders assessed the impact of the Fed’s policy stance and trade uncertainty. Gold slipped 0.1% to US$3,045.09 per ounce, but analysts at TD Securities maintain an upside target of US$3,150 per ounce later in the year. Oil prices firmed, with Brent crude up 1.9% to US$72.14 per barrel, while iron ore edged 0.2% higher to US$100.45 per tonne.
In currency markets, the Australian dollar weakened 0.8% to US$0.6305, reflecting broad-based US dollar strength. Bitcoin lost 1.3% to US$84,089, tracking declines in risk assets. Meanwhile, bond yields were little changed, with US 10-year Treasuries at 4.23% and Australian 10-year yields at 4.37%.
Economic Calendar
- New Zealand: February trade balance (8:45 AM AEDT)
- Japan: February national CPI (10:30 AM AEDT)
- Canada: January retail sales (11:30 PM AEDT)
This article was written by Paul Darwell, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
