Stocks on Wall Street sank as investors remain increasingly unnerved by the rapid shifts in the White House’s trade war.
The S&P 500 dropped 1.8% at 7am in Auckland with the likes of Nvidia and Tesla among those weighing on the Nasdaq Composite as it slid 2.2%. The Chicago Board Options Exchange’s volatility index – known as Wall Street’s fear gauge – jumped 13% to 24.81.
Uncertainty has been elevated by US President Donald Trump’s sharp tacks in his tariff regime as the White House waxes and wanes on how harsh the programme will be. After a call with Mexican President Claudia Sheinbaum, Trump pulled back tariffs on the southern border.
US data showed the trade deficit for the world’s biggest economy widened to a record in January, as importers front-loaded purchases in the run-up to the tariff programme.
“News on tariffs continues to inject volatility into markets,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “Nevertheless, data like these will only encourage President Trump to go ahead with his ‘reciprocal tariffs’ plan next month in a belief that these will reduce the deficit.”
There’s been no movement on Canada’s tariffs and prime minister Justin Trudeau said his nation will remain in a trade war with the US for the foreseeable future.
Bitcoin fell 2.1% to US$88,599 amid the heightened uncertainty, and ahead of the White House’s first crypto summit on Friday in Washington, which is expected to reveal more plans for a Bitcoin strategic reserve.
Financing defence
Across the Atlantic, European stock markets gained after the European Central Bank cut its key rates for a sixth time, reducing borrowing costs as member-states prepare to radically boost military spending.
Germany’s DAX 30 rose 1.5% and France’s CAC 40 increased 0.3%.
BNZ’s Wong said Germany’s plans to overhaul fiscal limits on defence spending and stand up a €500 billion infrastructure fund continued to support the euro and push government bond yields higher. The yield on 10-year German bunds rose another 4 basis points after their surge yesterday, driving up rates around the world.
New Zealand’s two-year swap rate climbed 5 basis points to 3.49% and 10-year swaps were up 11 basis points at 4.23%. The kiwi dollar traded at 57.43 US cents at 7am from 57.31 cents yesterday, and was little changed at 53.19 euro cents from 53.12 cents.
Meanwhile, shares of French satellite operator Eutelsat pared its recent gain, having surged 477% so far this week to €6.92 as retail investors have taken to investor forums to rally behind the heavily shorted company on suggestions it could replace Elon Musk’s Starlink.
The heightened uncertainty is expected to weigh on Australia’s stock market, with futures indicating a 0.3% decline.
There’s no major data scheduled in New Zealand today or Australia, with US non-farm payrolls the next major economic indicator.
Reporting by Paul McBeth. Image from Kanchanara on Unsplash.