Daily Market Reports | 8:06 AM
This story features NATIONAL AUSTRALIA BANK LIMITED, and other companies. For more info SHARE ANALYSIS: NAB
Trump’s import tariffs on Mexico, Canada and China are triggering a flight for safety across the world’s financial markets with Nasdaq equity futures indicating that index is poised to open -1.63% weaker later today with the Dow Jones possibly opening -0.90% softer.
The local market won’t be dancing to its own drum beat this morning.
(Today’s title provided by the team of economists at National Australia Bank ((NAB)).
| World Overnight | |||
| SPI Overnight | 8406.00 | – 101.00 | – 1.19% |
| S&P ASX 200 | 8532.30 | + 38.60 | 0.45% |
| S&P500 | 6040.53 | – 30.64 | – 0.50% |
| Nasdaq Comp | 19627.44 | – 54.31 | – 0.28% |
| DJIA | 44544.66 | – 337.47 | – 0.75% |
| S&P500 VIX | 16.43 | + 0.59 | 3.72% |
| US 10-year yield | 4.57 | + 0.06 | 1.26% |
| USD Index | 108.22 | + 0.35 | 0.32% |
| FTSE100 | 8673.96 | + 27.08 | 0.31% |
| DAX30 | 21732.05 | + 4.85 | 0.02% |
By Chris Weston, Head of Research, Pepperstone
Good morning.
Early last week the DeepSeek news flow saw many become AI experts overnight and while questions remain, we roll into the new trading week with the focus shifting firmly to pricing and positioning for the fallout from Trump’s weekend tariff announcement and the countermeasures that raise the risk of a tit-for-tat trade showdown.
We all knew tariffs on Mexican, Canadian and Chinese imports were coming. Still, there was conjecture on whether they would be pushed back to a later date, with claims of ‘progress in the negotiations’, or whether the levels previously stated would be staggered or to include carve-outs and exceptions.
With Trump placing an additional 25% tariffs on Mexican and Canadian imports and adding 10% to the current tariff rate on Chinese imports (with limited carve-outs), one can say that this outcome comes close to representing the most hard-lined approach of all the possible scenarios we had considered.
Granted, tariffs on Canadian oil imports are set at a lower 10%, but despite what we saw in the Columbian case study, there seems little chance the punchy tariffs set on these three nations will be reduced anytime soon.
Trump has also stated that he is unfased by the impending market reaction and given the S&P500 is near all-time highs, and US economics remain upbeat, Trump does have the increased capacity to go after his cause.
Subsequently, while the level of tariffs is expected to see some de-risking, drawdown (of risk positioning) and to promote higher FX and cross-asset volatility, the base-case at this stage is that this won’t trigger a full-blown risk aversion move, or a -10%-plus decline in the S&P500.
A counter-tariff response is not priced into markets
What makes the issue more of a concern for risky markets, and an increased challenge for market participants to price is the fact that the Canadians were so quick to counter, placing 25% tariffs on CA$107bn of US imports, with Trump -feeling he has pocket aces– going on to say that he may now look to double the tariffs.
Talk of recession risk in Canada will surely increase and should also raise the prospect that the Mexican central bank will cut the overnight rate by -50bp when Banxico meet on Thursday.
However, the market now looks further afield, with China the far bigger issue for global markets, and we’ve already heard they will come back and counter, although we have limited clarity on what that looks like.
Tariffs on EU imports are also coming, and could be known soon enough and again, it’s the potential response and reprisal that becomes a challenge for markets to price risk and certainty.
Market moves on the Monday re-open
For now, we expect US and EU equity futures to come under selling pressure on the re-open, with USDCAD, CADJPY, USDMXN and USDCNH all set to get a working over by FX traders on the Monday open – with risk FX (AUD, NZD and ZAR) also likely to trade weaker in sympathy.
China comes to the end of its Lunar New Year celebrations this week, so we consider how the PBoC manages the daily CNY fixing rate, as this could determine the extent of FX vol in G10 FX, with further gains in USDCNH likely to put a bid in other USD pairs.
The weekend tariff announcement may not be taken well by US equity futures, or risk FX on open, but it certainly validates the recent moves to all-time highs in gold and the tightness we’re seeing in the physical gold market, through positioning, flow data and lease rates.
US Treasuries may find buyers, and result in diverging paths, with UST yields moving lower amid a stronger USD, with the JPY and the CHF also likely set to benefit.
We also need to consider the incoming US data this week, as it could have implications for market pricing and broad sentiment.
Naturally, when we have a cloud hanging over the market in the form of tariff uncertainty, one suspects markets will be more sensitive to a miss on the economic data front than a beat, as we try to model the impact tariffs will have on future inflation, company margins and demand.
On the earnings side, it may be too early for any of the US companies reporting this week to offer real insights on trade policy for markets to work with, but we could feasibly hear something generic and along the lines of “We are looking closely at the tariff news flow, and it could offer challenges”.
Amazon and Alphabet are the two big US names to report this week, and while they could offer opportunities for single stock traders, the earnings may get overshadowed by the macro developments.
US NFP offers further USD upside risk
US nonfarm payrolls (NFP) will be the marquee data risk this week, with the median expectation (from economist’s) calling for 170k jobs, with an unchanged unemployment rate of 4.1%.
One could argue that there are upside risks to the consensus NFP call, given the last five NFP prints in January have averaged 328,000 jobs and have been a clear outlier month.
If the USD does push higher through the week, a solid NFP would only give the trade additional legs.
Interestingly, we also see Canada’s employment data out at the same time as the US NFP release and given the likely rising concerns on the future Canadian economic state, FX traders will not take kindly to a weaker Canadian jobs print.
US NFP aside, through the week we also navigate the US ISM manufacturing and services reports, as well as the JOLTS job openings release.
We also hear from a raft of Fed speakers, and while we understand that the Fed is on hold for a period, any context on how the respective Fed speakers see tariff risk impacting their judgment could be of interest.
We also see the BoE meeting on Thursday, with a -25bp cut firmly expected by economists and GBP swaps traders.
The ECB is set to enlighten the market later in the week where they model the policy neutral rate – a factor which could cause some ripples in EU rates pricing and by extension the EUR.
In Australia, we get retail sales (for Dec) although this shouldn’t move the dial too intently on the AUD, given the currency will used predominantly as a risk proxy this week.
Anyhow, keep an open mind to the price action and while the noise this week will intensify, this week could offer increased challenges to risk – Conversely, the buy-the-dip crowd may work their magic soon enough
On the calendar today:
-Australia 4Q Retail sales
-Australia ANZ job ads
-Australia Dec building approvals
-China Public Holiday
-Eurozone Jan CPI
-Global Manufacturing PMIs
-Australian Foundation Investment Co (AFIC) ((AFI)) ex-div 12c (100%)
-Opthea ((OPT)) investor briefing
FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/
Corporate news in Australia:
-AFR reports Armaguard and Australia’s banks are in urgent, RBA-led talks to overhaul operations and avert a potential cash supply crisis
-Singapore’s Syfe has acquired up to 19.99% of Selfwealth ((SWF)), challenging Bell Financial’s takeover ((BFG)) bid
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 2835.00 | – 12.29 | – 0.43% |
| Silver (oz) | 32.27 | – 0.35 | – 1.06% |
| Copper (lb) | 4.28 | – 0.03 | – 0.68% |
| Aluminium (lb) | 1.17 | – 0.01 | – 0.85% |
| Nickel (lb) | 6.76 | – 0.09 | – 1.28% |
| Zinc (lb) | 1.24 | – 0.02 | – 1.37% |
| West Texas Crude | 72.53 | – 0.52 | – 0.71% |
| Brent Crude | 75.67 | – 0.33 | – 0.43% |
| Iron Ore (t) | 101.59 | + 0.26 | 0.26% |
By Nigel Green, CEO of deVere Group
Donald Trump’s sweeping new tariffs on America’s three biggest trading partners Mexico, Canada, and China are a “colossal economic gamble” that could backfire spectacularly.
This is an extraordinary escalation of protectionist policy, one that risks igniting a full-scale trade war at a time when markets are already on edge.
The impact could be severe higher prices for American consumers, strained diplomatic relations, and retaliatory tariffs that could hammer US exports.
The Trump administration claims the tariffs are designed to curb drug trafficking and illegal immigration, but the economic fallout is undeniable.
Major industries, from agriculture to automobiles, will feel the squeeze as costs soar and supply chains fracture. In response, Mexico, Canada, and China have already announced retaliatory measures, setting the stage for prolonged economic conflict.
The scale and speed of this policy shift are staggering.
It’s a dangerous game of brinkmanship that could inflict lasting damage on global trade, corporate earnings, and investment portfolios. Investors cannot afford to be complacent.
deVere Group urges investors to take immediate action to protect their wealth.
Now’s the time to reassess exposure to risk-sensitive assets, hedge against volatility, and consider alternative investment opportunities.
Cash-heavy portfolios will be punished if inflation surges. Meanwhile, certain commodities and defensive sectors could provide a much-needed buffer.
Trump’s executive order also includes provisions allowing for further tariff expansions if other nations retaliate a clause that could deepen the crisis.
As uncertainty looms, the deVere CEO stresses the importance of a proactive investment strategy.
The world’s major economies are entering a new and unpredictable phase. Smart investors will be those who act now to mitigate risk and position themselves for opportunities amid the chaos.
Markets have reacted with heightened volatility, and analysts predict this trade war escalation could shave percentage points off GDP growth in multiple countries.
With global supply chains at risk and inflationary pressures rising, deVere Group advises investors to remain vigilant and ready to adapt to the rapidly shifting economic landscape.
This is a defining moment. Investors who fail to react swiftly may find themselves on the wrong side of history.
The Australian share market over the past thirty days
| Index | 31 Jan 2025 | Week To Date | Month To Date (Jan) | Quarter To Date (Jan-Mar) | Year To Date (2025) |
|---|---|---|---|---|---|
| S&P ASX 200 (ex-div) | 8532.30 | 1.47% | 4.57% | 4.57% | 4.57% |
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| AGL | AGL Energy | Upgrade to Outperform from Neutral | Macquarie |
| AX1 | Accent Group | Downgrade to Neutral from Buy | Citi |
| CCP | Credit Corp | Downgrade to Neutral from Outperform | Macquarie |
| CMM | Capricorn Metals | Downgrade to Hold from Buy | Bell Potter |
| Downgrade to Underperform from Neutral | Macquarie | ||
| DSE | Dropsuite | Downgrade to Hold from Buy | Ord Minnett |
| HMC | HMC Capital | Upgrade to Buy from Neutral | UBS |
| MDR | MedAdvisor | Downgrade to Hold from Buy | Bell Potter |
| SFR | Sandfire Resources | Upgrade to Neutral from Sell | UBS |
| SIG | Sigma Healthcare | Downgrade to Hold from Accumulate | Ord Minnett |
| ZIP | Zip Co | Upgrade to Buy from Neutral | Citi |
For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.
All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website. Click here. (Subscribers can access prices on the website.)
(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author’s and not by association FNArena’s – see disclaimer on the website)
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For more info SHARE ANALYSIS: AFI - AUSTRALIAN FOUNDATION INVESTMENT CO. LIMITED
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