United States
US equities sold off on Wednesday, with major indices reversing recent gains amid renewed selling pressure in the retail and healthcare sectors. The Dow Jones Industrial Average fell 1.9%, the S&P 500 dropped 1.6%, and the Nasdaq 100 declined 1.3%. The declines came as traders digested disappointing results from key retailers and reassessed the outlook for interest rates and corporate margins amid persistent inflation and policy uncertainty.
Target shares sank 5.8% after the company posted weaker-than-expected quarterly profit and revenue and cut its full-year guidance. The retailer cited consumer backlash related to earlier diversity and inclusion initiatives and ongoing uncertainty around trade policy under the Trump administration. Investors were also rattled by Target’s admission that broader demand conditions remain fragile heading into the second half of the year.
Adding to the market’s concerns, UnitedHealth Group tumbled following revelations that the insurer had been secretly incentivising nursing homes with bonus payments to reduce hospital transfers for critically ill patients. The story raised reputational risks and revived regulatory scrutiny over the sector’s ethical standards.
Meanwhile, Boeing offered a glimmer of positive sentiment, announcing that production of its flagship 737 jet was nearing a key milestone, signalling that recovery efforts following last year’s mid-air emergency were progressing on schedule.
Bond markets extended their decline, with the yield on the 10-year Treasury note rising to 4.59%, up from 4.54% in the previous session. This marks a continuation of the recent uptrend in yields driven by fears over ballooning US fiscal deficits and elevated supply. The 2-year yield also ticked higher, narrowing the spread between short and long-term bonds.
Volatility rose, with the VIX Index climbing 2.1 points to 20.22, reflecting growing investor caution. The US dollar softened marginally, while Bitcoin gained 1.0% to trade at US$106,902, its highest level since January as risk appetite in crypto markets remained resilient.
Europe
European shares were broadly flat as investors digested a mixed bag of corporate updates and waited for clarity on EU-US trade developments. The Stoxx Europe 600 Index ended little changed after reversing earlier losses, as strength in telecoms and technology shares offset weakness in retail and consumer discretionary names.
Luxury giant LVMH declined 2.2% after warning investors that demand softness seen earlier in the year had extended into the current quarter. The update weighed on broader consumer sentiment, with other retail stocks also under pressure. In contrast, Marks & Spencer rose 1.9% after quantifying the financial impact of a recent cyberattack, which gave investors confidence in the company’s ability to move past the incident.
The UK’s FTSE 250 index fell 0.7% after data showed a stronger-than-expected jump in inflation, now at its highest level in over a year. The reading reduced hopes for near-term interest rate cuts and complicated the Bank of England’s policy path. Gilt yields rose in response, while the British pound held steady.
Strategically, EU leaders continue to aim for renewed momentum in trade talks with the US, though analysts remain sceptical that a comprehensive transatlantic deal can be reached in the near term. Market watchers noted that European equities have followed the global rebound since the recent US-China trade truce but are now showing signs of fatigue as macro concerns take centre stage.
Australia
The Australian sharemarket advanced on Wednesday, bolstered by dovish signals from the Reserve Bank of Australia and strength across banks, healthcare, and energy names. The S&P/ASX 200 rose 0.5%, or 43.5 points, to finish at 8386.8—just 2% shy of its all-time high set earlier this year. The broader All Ordinaries also climbed 0.5%, with nine of eleven sectors closing in positive territory.
Banks led the rally, benefitting from rising confidence that the RBA could deliver further interest rate cuts in coming months. Commonwealth Bank surged 1.5% to $174.98, hitting a record high during intraday trade. NAB added 1.2% to $37.64, and Westpac edged up 0.2% as reports emerged of a potential cost-cutting program involving over 1,500 job cuts.
The RBA’s decision earlier in the week to lower the cash rate to 3.85%, combined with Governor Bullock’s disclosure that a more aggressive 50bp cut had been considered, fuelled expectations of further easing. CBA’s economics team has since revised its forecasts, bringing forward potential rate cuts to as early as July or August, citing slower inflation and external risks.
Energy stocks outperformed, aided by a jump in oil prices amid reports that Israel is preparing for potential military action against Iranian nuclear sites. Woodside gained 1.4% to $21.75 and Santos advanced 1.1% to $6.45. The move also lifted the broader sector, which was among the day’s top performers.
Healthcare names also saw strong gains, with ResMed rising 4.0% to $38.65 and Fisher & Paykel adding 3.1% to $33.84. Utilities were higher too, with Contact Energy climbing 3.4% and Origin Energy up 1.0% to $11.14.
However, not all stocks participated in the rally. Nufarm plunged 30.1% after issuing a profit warning tied to weakness in fish oil markets and rising operational costs. Mayne Pharma also slumped 30% after its US suitor Cosette flagged a material deterioration in trading conditions, casting doubt on a planned takeover. James Hardie fell 6.2% amid concerns about the US renovations market, while Adriatic Metals jumped 25.3% after confirming takeover talks with Canadian miner Dundee Precious.
Despite Wednesday’s gains, the ASX is expected to open lower today, with SPI futures pointing down 68 points or 0.8% to 8340, following a weak US session.
Commodities
Gold extended its gains, up 0.7% to US$3314.06 per ounce as safe-haven demand persisted in the wake of rising geopolitical tensions and ongoing concerns over global debt loads. The metal has now rallied for three consecutive sessions, recovering from last week’s pullback.
Oil prices edged lower despite the Middle East headlines. Brent crude slipped 0.9% to US$64.81 a barrel, paring earlier gains. Traders appear cautious ahead of inventory data and potential policy responses to rising tensions. WTI crude also declined slightly.
Iron ore rose 0.5% to US$99.90 per tonne, continuing a slow recovery amid stabilising demand indicators from China. Base metals were mixed, with copper flat on the day and aluminium marginally higher.
The Australian dollar edged higher, rising 0.3% to US64.45¢, supported by stronger commodity prices and a softer US dollar backdrop.
Economic Calendar
AU:
- PMI reports (May) – 09:00
EU:
- PMI reports (May) – 18:00
US:
- PMI reports (May) – 23:45
This article was written by Paul Darwell, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
