Kiwi sinks as speeding US economy bolsters greenback; Wall St slides
European health stocks knocked by US medical device probe.
The New Zealand dollar dropped below 58 US cents for the first time in more than five months as data showed the US economy grew at an even faster pace than previously thought, prompting some investors to dial back their expectations for Federal Reserve to cut interest rates aggressively.
That shift in tone weighed on Wall Street with the three major indices on track for their first three-day decline since March in the runup to US President Donald Trump’s Liberation Day tariff reveal.
Across the Atlantic, stocks in Europe were weaker with health companies suffering the same fate as Fisher & Paykel Healthcare after the US Department of Commerce launched a national security probe into imported medical devices, weighing on the likes of Germany’s Siemens Healthineers and Denmark’s Coloplast.
Meanwhile, Alphabet was on the red side of the ledger with Reuters reporting Google faces a hefty fine as the European Commission continues to target the search engine giant’s integrated suite of products, while Amazon declined after cutting a deal with the Federal Trade Commission over the way it sold the Prime streaming service to consumers.
Three-day lull
Stocks on Wall Street are poised for their first three-day decline since March after US gross domestic product growth in the June quarter was revised up to an annual pace of 3.8% from the previous 3.3% pace, which was itself an upgrade.
The stronger footing for the world’s biggest economy prompted analysts to pare their predictions for the Federal Reserve to cut its key rate, which sapped their already waning appetite for riskier assets.
The greenback rallied, with the kiwi falling to 57.74 US cents at 7am in Auckland from 58.24 cents yesterday, while Wall Street’s S&P 500 was down 0.5% in late trading, the Dow Jones Industrial Average fell 0.4% and the Nasdaq Composite slipped 0.5%.
“Stronger than expected US economic data overnight drove higher US rates, as the market pared scope for easier monetary policy, and broad gains in the US dollar,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “We weren’t expecting second-tier US economic data releases to be market moving, but they were stronger across the board, providing a consistent message that the US economy was humming along quite nicely despite prevailing heightened policy uncertainty.”
Freeport-McMoran extended its declines, falling another 6.4% after downgrading its production outlook following the fatal mud rush at its major copper mine in Indonesia. The closure drove copper prices higher, buoying rival mining companies.
Regulatory rumblings
Alphabet was down 0.6% in late trading amid a Reuters report that the European Commission is preparing to fine Google under new European Union tech rules over the search engine giant’s integrated products favouring the likes of Google Shopping, Google Flights and Google hotels over rivals. Google was slapped with a €2.95 billion earlier this month under older antitrust regulation.
Meanwhile, Amazon slid 1.3% after cutting a US$2.5 billion deal with the Federal Trade Commission to settle claims it tricked customers into signing up to its Prime streaming service. The e-commerce group will pay a US$1 billion civil penalty and create a US$1.5 billion fund to repay customers.
Intel surged 8.9%, posting the biggest gain on the S&P 500, amid reports it approached Apple and Taiwan Semiconductor Manufacturing Co in its efforts to reverse the chipmaker’s flagging fortunes.
Across the Atlantic, stock markets were weaker with the UK’s FTSE 100 index down 0.4%, Germany’s DAX 30 falling 0.6% and France’s CAC 40 declining 0.4%, with health companies among the hardest hit as the US commerce department opened a national security investigation into imports of medical devices, robotics and industrial machinery – seen as a pathway to the introduction of new tariffs.
New Zealand’s Fisher & Paykel Healthcare was knocked by the news on Thursday, leading the S&P/NZX 50 index lower, with the benchmark index on track to snap three weeks of gains.
Across the Tasman, Australian futures are pointing to a 0.1% decline when the S&P/ASX 200 index today.
Local data today include ANZ’s consumer confidence survey, while a clutch of small-cap companies including 2 Cheap Cars and PaySauce are holding their annual meetings.
Reporting by Paul McBeth. Image from Paul Weaver on Unsplash.
