United States
Wall Street edged higher to start the week, as traders brushed aside the weekend’s announcement of higher U.S. tariffs on several countries. Investors are betting that the proposed tariff levels will ultimately be negotiated lower as talks continue.
At the close, the Dow Jones Industrial Average rose 88 points (0.20%) to 44,459, while the Nasdaq Composite gained 0.27% to finish at 20,640. The S&P 500 added 8 points, or 0.14%, to close at 6,268.
Seven of the S&P 500’s eleven sectors advanced, led by communication services, while energy was the worst performer due to a drop in oil prices.
Within the communication services sector, Netflix climbed 1.35%, and Warner Bros. Discovery rose 2.39% after its new Superman film posted strong opening weekend box office numbers. In contrast, energy stocks declined after President Trump announced plans to impose tariffs on buyers of Russian oil unless Russia agrees to a peace deal within 50 days. Traders had priced in more stringent action on Russia and discounted the effectiveness of tariffs announced. The resulting dip in oil prices weighed on Chevron and Exxon, which fell 2.36% and 1.31%, respectively.
Looking ahead, investors are focused on the start of Q2 earnings season, with financials set to begin reporting from tomorrow. Market strategists are growing more optimistic about the economic outlook, noting that many companies are effectively navigating emerging risks. Strong earnings results could reinforce this sentiment.
In fixed income, bond yields ticked slightly higher. The 10-year Treasury yield rose 2 basis points to 4.43%, while the 30-year yield climbed 3 basis points to 4.98%. Traders are awaiting Tuesday’s inflation report, where core inflation is expected to rise to 2.9%.
Finally, markets are closely watching tensions between the White House and the Federal Reserve, after administration advisors suggested that Chairman Powell could be dismissed over budget overruns tied to the Fed’s new Washington headquarters.
Europe
European markets ended Monday mixed, as tariff concerns weighed on sentiment. The Euro Stoxx 600 slipped 0.06% to close at 546.99, while the FTSE 100 rose 0.64% to 8,998, supported by expectations of an interest rate cut and positive pharmaceutical news.
AstraZeneca shares rose 2.03% following encouraging trial results for a new experimental blood pressure drug, providing a significant lift to the UK index.
However, concerns over a newly announced 30% U.S. tariff on EU goods impacted European auto stocks, with BMW falling 2.48% and Volkswagen declining 1.89%. In response, European trade negotiators stated they would pause retaliatory tariffs on the U.S. to keep diplomatic discussions open.
Investor sentiment remained relatively calm despite the news. As the Head of Strategy at Panmure Liberum noted, “While tariffs on the EU sound scary, they are sure to change in coming weeks, which is why investors remain relatively calm so far.”
Bond markets told a different story, with yields moving higher across the board. Germany’s 30-year bond yield hit a two-year high, closing at 3.24%, while the 10-year yield rose 1 basis point to 2.73%. The rise reflects growing concerns over increased sovereign debt levels, as European governments ramp up military spending and grapple with the economic effects of trade policy uncertainty.
Looking ahead, Europe’s earnings season begins this week, with chipmaker ASML set to report results on Wednesday. Meanwhile, upcoming inflation figures for both the Eurozone and the UK are also expected to be in focus for investors.
Australia
Australian equity investors remained relatively unfazed by the weekend’s announcement of tariff levels from the US President, with the ASX 200 finishing Monday just 9.7 points lower (-0.11%) at 8,570.40. The index traded in a narrow range around flat, with four of the eleven sectors posting gains and seven declining. Sector moves were modest, with no sector rising or falling more than 0.60%. Energy and materials led the gains, while industrials were the weakest performer.
Investor attention centred on the iron ore sector, as Prime Minister Anthony Albanese visited China to meet with President Xi Jinping. The Prime Minister also hosted a meeting between Chinese and Australian business leaders, focusing on green steel initiatives. Iron ore prices continued to rise, supported by stronger-than-expected Chinese trade data released Monday. Exports from China rose 5.8% in October, including record steel exports, as firms moved to capitalise on the current tariff truce between the US and China.
Major miners advanced on the news: BHP gained 0.94% to $39.73, while Rio Tinto rose 0.58% to $111.74. Gold miners also contributed to gains in the materials sector, with the price of gold climbing amid rising trade tensions. Evolution Mining added 14 cents to close at $7.58, and Northern Star advanced 1.72% to $16.53.
Rare earths miner Lynas continued its rally, rising 3.41% to $10.00 and marking a two-day gain of 20%. The surge followed news last week that the US Department of Defense had taken a 15% stake in US-based MP Materials, prompting a global re-rating of the sector.
In the energy space, Woodside rose 0.42% to $24.07 on a jump in oil prices. However, coal miners faced pressure from weak Chinese import data, with Yancoal down 0.16% and Whitehaven Coal falling 0.33%.
Gains in these sectors were offset by continued rotation out of banks. The banking sub-index fell 0.43%, led by Commonwealth Bank, which declined 70 cents to $178.72, and ANZ, which dropped 0.82% to $30.08.
The industrials sector was dragged lower by Computershare, which fell 3.01% to $39.60 following a broker downgrade from Morgan Stanley, citing margin pressure concerns. Reece Plumbing also declined, shedding 2% to $13.20, as investors continued to react to a recent earnings downgrade.
In fixed income, bond yields moved higher. The Australian 10-year yield rose 4 basis points to 4.37%, while the 2-year yield gained 2 basis points to 3.42%.
The Australian market is expected to open strongly today, with ASX 200 futures trading 51 points higher, indicating a gain of 0.60%. On Monday, traders had priced in weaker US markets due to declines in U.S. equity futures. However, those losses did not materialise, prompting a rebound in local sentiment.
The Australian dollar (AUD/USD) is starting the day slightly lower at 0.654
Commodities
Oil prices declined on Monday amid global growth concerns and renewed clarity around further sanctions on Russia, leading to a drop in trader demand.
Brent Crude fell 1.79% to US$69.10, while West Texas Intermediate (WTI) dropped US$1.59, or 2.32%, to US$66.85.
The weakness followed an announcement by the U.S. administration outlining plans to impose tariffs on third-party countries that purchase oil from Russia. However, traders expressed scepticism about the feasibility of enforcing such measures, particularly given that key importers like India and China would be affected. In addition, the typical window for negotiation that accompanies such U.S. policy announcements tempered immediate concerns, further reducing urgency in the market.
Partially offsetting the decline in oil demand was news from China showing a 7.4% increase in oil imports in June, signalling underlying strength in the region’s energy needs.
Iron ore prices remained firm, supported by stronger-than-expected Chinese export data. The commodity ended the New York session at US$99.35 per tonne, after earlier gains during Asian trade driven by a surprise jump in Chinese exports—particularly steel.
In base metals, copper slipped, falling US$42 to US$9,619 per tonne on the LME, as investors reacted cautiously to mixed global signals.
Gold eased, ending the session 0.36% lower at US$3,343, retreating from three-week highs reached earlier in the day. Silver also declined by 0.72% to US$38.14, though it continues to trade near decade highs.
Bitcoin rose 0.90% to US$120,198, maintaining its recent upward momentum.
Economic Calendar
AU:
- Westpac Consumer Confidence (Jun) – 10.30am
China:
- GDP Growth (Q2) – 12:00pm
- Industrial Production (Jun) -12:00pm
- Retail sales (Jun) -12:00pm
US:
- Consumer Price Indexes (Jun) – 10:30pm
- NY – Empire State Manufacturing Index (Jun) -10:30pm
This article was written by Paul Darwell, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
