The Overnight Report: Risk Off Wednesday

This story features AUSTRALIAN ETHICAL INVESTMENT LIMITED, and other companies. For more info SHARE ANALYSIS: AEF

SPI futures are deteriorating at quite the noticeable pace this morning.

Good morning

Negotiating tactic or otherwise?

Now Trump’s import tariffs on goods from Mexico, Canada and China have effectively been put into place, and all three targets have responded, as they declared they would, the question investors are asking is: what now?

US equities continued with weakness throughout last night’s session, though buyers did step in towards the finish of the session.

Further adding to negative market sentiment were remarks from US Treasury Secretary Scott Bessent that the President’s policy isn’t about Wall Street but about Main Street and rebalancing the economy.

Bessent opined the stock market sell-off is temporary, inferring the new administration won’t bow to market pressures.

SPI futures are free-falling as we write this morning’s report. Currently indicating the market will show a sea of red when trading opens at 10am.

The yield on the US 10-yr note rose 6.4bp to 4.21%. Market commentators pointed out US bonds are now indicating a May Fed cut at slightly greater than 50% chance, which seems rather unlikely.

But those are the implications when money seeks a temporary safe haven.

Oil closed up, with WTI futures rising 0.3% to USD68.3/bbl. Global benchmark Brent crude briefly dropped below $US70 a barrel for the first time since October.

Gold gained as the USD weakened across the board.

Investors will keep a close watch on China’s National People’s Congress today for any policy adjustment aimed at boosting economic growth.

US levies on aluminium and steel are due to commence next week while a review on copper imports is also being undertaken.

Iron ore also got caught up in the sell-off, with futures declining for an eighth consecutive session.

Jason DeVito, Senior Portfolio Manager for Emerging Market Debt at Federated Hermes:

“We don’t believe aggressive tariffs on Mexico will remain in place for long given the substantial inflationary impact it would have on US economy.

“However, we do expect some form of tariffs to be levied but not 25% persisting. 

“25% tariffs, if persistent would almost invariably shock the Mexican economy into recession in my view. 

“External buffers in Mexico are strong and debt to GDP ratio is moderate. We expect limited default risk, but the next 12 months may be an economic malaise.”

On the calendar today:

-Australia 4Q GDP

-Global PMI surveys

-Australian Ethical Investment ((AEF)) ex-div 5c (100%)

-Accent Group ((AX1)) ex-div 5.50c (100%)

-Coles Group ((COL)) ex-div 37c (100%)

-Cleanaway Waste Management ((CWY)) ex-div 2.8c (100%)

-EQT Holdings ((EQT)) ex-div 55c (100%)

-EVT Ltd ((EVT)) ex-div 16c (100%)

-Hitech Group Australia ((HIT)) ex-div 5c (100%)

-IDP Education ((IEL)) ex-div 9c (50%)

-Imdex ((IMD)) ex-div 1.50c (100%)

-Mercury NZ ((MCY)) ex-div 8.67c

Northern Star Resources ((NST)) ex-div 25c

(and more)

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

Corporate news in Australia:

-The Australian government’s Foreign Investment Review Board has approved Pacific Equity Partners’ $1.4bn takeover of SG Fleet ((SGF))

-Newmont Corp ((NEM)) has finalised the divestment of three North American mines

-Regis Resources ((RRL)) among the bidders for EMR Capital’s $2bn Ravenswood gold mine

By Nigel Green, CEO of deVere Group

Trump’s tariffs Tuesday is here and the levies are reshaping the global investment landscape in real time.

The US imposes sweeping 25% tariffs on Canada and Mexico, an additional 10% on Chinese imports, and a looming threat against the European Union, and markets brace for increased volatility.

These are not theoretical concernsthey’re immediate, transformative forces that demand action from investors who seek to stay ahead.

Inflation is set to surge as the cost of everyday goods rises, squeezing corporate margins and reshaping supply chains across industries.

Forecasts from deVere Group indicate that inflation in the US could climb by as much as 2.1%, putting pressure on the Federal Reserve to maintain a more hawkish stance for longer than markets had anticipated.

Investors must reassess their positioning in light of these developments.

This isn’t a time to sit on the sidelines. An expected tariff-fuelled inflationary environment demands strategic asset allocation, and those who act now will be better placed to turn volatility into opportunity.

The market implications are vast. The US dollar, often buoyed by trade tensions, is likely to maintain resilience as investors flock to perceived safety.

Commodities, already in high demand, could experience further price surges, benefiting energy and industrial sectors.

Meanwhile, domestic manufacturing stocks stand to gain as supply chains adjust to new tariff realities.

At the same time, businesses reliant on imports face rising costs, forcing either a margin squeeze or price increases for consumers.

Tech, retail, and automotive sectors will need to navigate this environment carefully. Those who take a proactive approachsecuring exposure to companies with strong pricing power or tapping into alternative marketswill be best positioned to thrive.

The additional 10% tariff on Chinese goods compounds existing economic frictions, amplifying costs for industries that rely on China’s vast manufacturing infrastructure.

“From Asia to Europe, Latin America to Africa, and beyond, businesses and investors must anticipate and adjust to a world where supply chain recalibrations are no longer optional, but essential.

As inflationary pressures are likely to mount, global portfolios must adapt.

Sectors that thrive in such an environmentcommodities, energy, and industrialsare poised for strong performance.

Companies that can pass on costs without eroding demand will outshine competitors struggling to maintain margins.

Investors who are selective and strategic will capture outsized gains. Those who hesitate risk being left behind.

Beyond equities, alternative assets come into sharper focus. Hard assets, inflation-hedged investments, and emerging market opportunities tied to evolving trade flows could present significant upside.

These tariffs are a pivotal shift in global economic policy with immediate and potentially lasting consequences.

Investors who recognize the opportunity now, who take decisive action rather than reacting after the facts, will be the ones who are likely to stand to benefit most in this new era of trade and market recalibration.

The Australian share market over the past thirty days

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.)

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