Tariff uncertainty, AI fallout weigh on Wall Street
Mercury the next gentailer to report.
Bonds rallied and stocks on Wall Street and in Europe were broadly weaker as US President Donald Trump’s new 15% global tariffs revived uncertainty about the global trade system, while a Citrini Research report laying out the risks artificial intelligence posed to a raft of sectors kept investors on edge.
Financial stocks were among the hardest hit, with American Express and JPMorgan Chase among those leading the Dow Jones Industrial Average lower, while the Magnificent 7 megacap tech stocks were mixed ahead of chipmaker Nvidia’s quarterly earnings on Wednesday.
Still, Australian futures are pointing to a marginally stronger opening for the S&P/ASX 200 index after its decline on Monday, with media group Nine Entertainment, energy company Woodside Energy and data centre firm NextDC among those reporting across the Tasman today.
And locally, earnings season continues with electricity generator-retailer Mercury NZ next cab off the rank following capital raisings by Contact Energy and Genesis Energy, while Vulcan Steel, NZME, Property for Industry and PGG Wrightson are also in the diary.
Sour mood
Sentiment soured in the Northern Hemisphere session with the volatility index – known as Wall Street’s fear gauge – spiking 13% to 21.53 as investors digested US President Donald Trump’s new 15% global tariffs after the Supreme Court tossed out his Liberation Day regime.
The Dow was down 1.5% in late trading, with the S&P 500 index falling 1% and the tech-heavy Nasdaq Composite falling 1.1%, while across the Atlantic, the UK’s FTSE 100 was marginally weaker, Germany’s DAX fell 1.1% and France’s CAC 40 dipped 0.2%.
“Risk sentiment is weaker as markets further digest the implications of the latest saga on Trump’s tariff policy,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “In reality, Trump’s effectiveness in using tariffs as a tool to threaten other countries has diminished significantly.”
The increased nervousness stoked demand safe havens such as gold and bonds, with the yield on 10-year US treasuries falling 6 basis points to 4.03% and gold futures rising 2.8% to US$5,223 an ounce.
Financial stocks were among the hardest hit on the Dow, as Amex sank 7.3% and JPMorgan Chase dropped 4.8%. Meanwhile, PayPal rallied 6.6% after Bloomberg reported the payments firm has attracted takeover interest having halved in value since August.
AI ripples
A report by Citrini Research on the threats AI poses to various parts of the economy kept investors nervous about the ripples of the burgeoning technology, with Salesforce sliding 5.2% in late trading.
The Mag7 megacap stocks were broadly weaker ahead of Nvidia’s quarterly earnings report on Wednesday, with Tesla, Amazon, Microsoft and Meta Platforms on the red side of the ledger. Nvidia and Apple gained.
And Eli Lilly rallied after Danish Ozempic maker Novo Nordisk said its next generation CagriSema obesity treatment failed to beat Eli Lilly’s Zepbound drug in a head-to-head study. Novo Nordisk sank 16%.
The heightened investor nervousness is pointing to a small increase to the day in the antipodes, with Australian futures pointing to a small increase to the ASX200 when trading opens across the Tasman, while the kiwi dollar fell to 59.62 US cents at 7am in Auckland from 59.84 cents yesterday.
Mercury NZ is the headline result in the local earnings season, with the power company expected to deliver a robust result for a period when its hydro storage exceeded other generators. The gentailer’s result follows capital raisings by its peers Contact and Genesis.
Among other companies reporting today, Vulcan Steel and NZME will provide an update on the state of New Zealand’s building sector and appetite for advertising, while PGG Wrightson will give an insight into the healthy agricultural sector. Industrial landlord PFI is also due to report.
No major local data are scheduled for today.
