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Tariffs, US jobs set soft tone for antipodes

The antipodean markets are poised to start the week on the back foot after stocks on Wall Street and in Europe slumped as US President Donald Trump’s wide-ranging tariff programme and soft US employment figures spooked investors on Friday.

Still, corporate earnings season is beating expectations, with 82% of S&P 500 companies that have reported so far coming in ahead of analysts’ expectations, although Amazon wasn’t among them as investors question whether it’s keeping up with the pace of artificial intelligence expansion.

Trump fired the head of the US Bureau of Labor Statistics, Erika McEntarfer, in the wake of the weak jobs report, accusing her of rigging the data after downward revisions in the notoriously volatile series, and markets are pricing in a greater chance of a rate cut from the Federal Reserve, with the resignation of governor Adriana Kugler giving the White House another appointment to the federal open market committee.

And oil prices dipped after the OPEC+ group of oil producing nations met over the weekend and decided to boost production.

I don’t like Mondays

Australian futures are pointing to a 0.4% decline for the S&P/ASX 200 index when trading opens across the Tasman, with investors gloomier after a rough Friday in Northern Hemisphere markets. The Chicago Board Options Exchange’s Volatility Index – known as Wall Street’s fear gauge – spiked up 22% to 20.38.

US President Donald Trump’s tariff regime came into effect this month, while his letter to global pharmaceutical chiefs asking for lower prices weighed on European drugmakers on Friday as Germany’s DAX 30 fell 2.7% and France’s CAC 40 dropped 2.9%.

Wall Street sank on Friday as the S&P 500 dropped 1.6% and the tech-heavy Nasdaq Composite fell 2.2% after US jobs data showed the world’s biggest economy added 73,000 jobs in July, short of the 104,000 predicted.

Downward revisions in earlier months raised the ire of the president, with Trump firing US Bureau of Labor Statistics head Erika McEntarfer, accusing her of rigging the data to make him look bad. Labour data are notoriously volatile and prone to revisions.

New Zealand jobs data are scheduled later this week.

New eyes

Meanwhile, US Federal Reserve governor Adriana Kugler announced her resignation, creating a vacancy on the federal open market committee which sets monetary policy, with markets pricing in a greater chance of a rate cut by the Fed.

“The resignation will enable the Trump administration to make nominations for her replacement to the Fed board, select an official to lend support for lower rates and potentially serve as the next Fed chair,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note.

The yield on 10-year US Treasuries fell to 4.23% from 4.38%.

The kiwi dollar started the week on the rise, trading at 59.18 US cents at 7.30am from 58.99 cents at 7am and 58.79 cents last week.

Making money

US corporate earnings continues this week with Walt Disney Co, McDonald’s and Caterpillar among blue chip companies reporting. Amazon sank on Friday after its cloud unit fell short of expectations in the burgeoning AI sector, while Apple’s strong iPhone sales weren’t enough to avoid a decline on Friday.

Berkshire Hathaway nudged higher after reporting a 4% decline in quarterly earnings due largely to a softer result from its insurance businesses. Warren Buffet’s investment firm kept building its cash stockpile, refrained from buying back shares, and was a net seller of stocks for an 11th quarter.

US earnings have largely been beating expectations after 66% of S&P 500 have reported, with 82% coming in above analysts’ forecasts, according to FactSet data.

Brent crude oil futures dipped 0.2% to US$69.52 a barrel after OPEC+ decided to boost production by 548,000 barrels a day in September, unwinding the production cuts of 2023.

The New Zealand government announced changes to the Conservation Act over the weekend to allow for more tourism concessions on conservation land, and plans to charge foreign visitors a levy to access high volume sites, being Cathedral Cove, the Tongariro Crossing, Milford Sound and Aoraki Mount Cook.

Reporting by Paul McBeth. Image from Aaron Sebastian on Unsplash.

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