Stock markets on both sides of the Atlantic tumbled amid heightened fears that the United States’ trade war will tip the world’s biggest economy into a recession, with tech companies among the hardest hit.
Wall Street’s tech-heavy Nasdaq Composite dropped 4.2% in afternoon trading with Elon Musk’s Tesla slumping 14%, leading declines among the Magnificent 7 companies which have an outsized bearing on US stock markets. Rocket Lab is among those caught up in the tech slump, falling 11% to US$16.75, its lowest since mid-November.
The rout began in some Asian markets on Monday – New Zealand’s S&P/NZX 50 sidestepped the decline – after US President Donald Trump refused to say whether his trade war will lead to the US economy shrinking.
Meanwhile commerce secretary Howard Lutnick played down the prospect of a recession and National Economic Council head Kevin Hasset said there were plenty of reasons to be upbeat about the US economy.
“Newsflow has been light to start the week but increased anxiety over President Trump’s policy agenda, particularly tariffs and slashing federal government spending, continues to impact the market, with much lower equities and Treasury yields falling,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “The cumulative fall in the S&P 500 over recent weeks is now over 8%, while the Nasdaq index is down over 13%.”
Nervous times
Wall Street’s fear gauge – the Chicago Board Options Exchange’s volatility index – spiked to its highest level since August and economists at the likes of Goldman Sachs, JPMorgan Chase and Morgan Stanley are growing gloomier about the prospects for the US economy.
The trade war stepped up a gear as Canada’s Ontario imposed a 25% surcharge on electricity exports to the US, and incoming prime minister Mark Carney vowing to win the trade war.
The focus shifts to metals later this week when US tariffs on steel and aluminium products come into effect on Wednesday in the US, with Australia unlikely to secure an exemption as it did during Trump’s first term.
The kiwi dollar rose to 90.84 Australian cents at 7am in Auckland from 90.59 cents yesterday, and was little changed at 57.11 US cents from 57.12 cents.
Bitcoin sank 5% to US$78,447 as the downbeat tone added to disappointment about the US strategic reserve, although Bloomberg reported that the Singapore Exchange plans to list Bitcoin perpetual futures for institutional and professional investors.
That negative sentiment spread across the Atlantic, with European stock markets led lower by tech stocks as Germany’s DAX 30 fell 1.7% and France’s CAC 40 was down 0.9%, and Australian future are pointing to a 0.8% decline for the S&P/ASX 200 index.
Denmark’s Novo Nordisk tumbled 8.1% after clinical trials for its CagriSema obesity drug fell short of investors’ expectations, while rival Eli Lilly said it plans to rollout its Mounjaro weight-loss drug in emerging markets such as India, Brazil and Mexico later this year.
Local data today include December quarter manufacturing figures while consumer and business confidence surveys are expected across the Tasman.
Reporting by Paul McBeth. Image from David von Diemar on Unsplash.