US, European stocks slide as Trump’s Iran deadline looms
The RBNZ is set to keep the OCR at 2.25%.
Stocks on Wall Street and in Europe declined and oil prices rose as US President Donald Trump ramped up threats against Iran as a deadline to reach a truce draws near, with reports the Islamic Republic walked away from negotiations.
Walmart, Nike and Home Depot led the Dow Jones Industrial Average lower in a broad-based selloff in late US trading, while health insurers including UnitedHealth Group rallied on a bigger increase in Medicare payments than expected and chipmakers Intel and Broadcom gained on new supply deals.
The kiwi dollar was broadly weaker, falling to a 13-year low against its Aussie counterpart, ahead of the Reserve Bank’s policy review, which is expected to keep the official cash rate unchanged.
And trading of Fonterra Shareholders’ Fund units will be halted today to allow for the dairy exporter’s capital return from the sale of its Mainland consumer business to France’s Lactalis, while prices fell at the latest Global Dairy Trade auction.
Heightened rhetoric
Global markets were on edge as US President Trump threatened to wipe out Iran’s civilisation if the Islamic Republic doesn’t accede to a peace deal in a post on the Truth Social platform. The volatility index, known as Wall Street’s fear gauge, jumped 13% to 27.31, while the odds of a ceasefire being reached this month got shorter on prediction market Polymarket, with traders pricing in a 33% chance of a truce being reached.
The White House has threatened to attack civilian infrastructure including bridges and power plants if a ceasefire isn’t reached by 12pm New Zealand time, although Iran has reportedly withdrawn from talks over the heightened threats.
“Trump intensified his rhetoric overnight, warning he would erase Iran’s civilization if Tehran fails to meet US demands,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note. “US equities are softer – the S&P is modestly lower but off the session lows – while FX and rates markets have been relatively contained.”
Stocks on Wall Street were broadly weaker in late trading, with the Dow and S&P 500 both down 0.8% in late trading, while the tech-heavy Nasdaq Composite fell 1.1%.
Energy major Chevron was one of the few gainers, following oil prices higher with Brent crude futures up 0.6% at $109.87 a barrel at 7am in Auckland.
Health insurers also rallied, with UnitedHealth surging 9.8% after the White House lifted the final 2027 payment rates on the Medicare Advantage programme by more than analysts had predicted. Local biotech firm Pacific Edge expects to reclaim coverage under the US healthcare programme after a positive committee hearing in February.
Lifting the veil
Airlines were broadly weaker ahead of Delta Air Lines’ quarterly earnings on Wednesday in the US, setting a soft lead for local carriers such as Air New Zealand and Qantas Airways.
European stock markets were broadly weaker, with the UK’s FTSE 100 down 0.8%, Germany’s DAX falling 1.1% and France’s CAC 40 sliding 0.7%.
Australian futures are pointing to a 0.2% decline for the S&P/ASX 200 index when trading opens across the Tasman, while the kiwi dollar traded at 57.06 US cents at 7am from 57.02 cents yesterday.
The New Zealand dollar dropped to 82.14 Australian cents from 82.44 cents, touching a 13-year low ahead of the Reserve Bank’s policy review, which is widely expected to keep the OCR at 2.25% as the central bank continues to gauge the impact of the energy shock on broader inflation.
Bond traders are pricing in at least two 25 basis point hikes by the end of the year, with the first increase fully priced in at the September review.
Prices fell at the latest GDT event, with the GDT prices index down 3.4% and an average winning price of US$4,228 a tonne. Whole milk powder prices declined 0.7% to US$3,687.
Meanwhile, Fonterra Shareholders’ Fund units will be halted today to allow for the $2 per unit capital return from the sale of the Mainland consumer business. The units have climbed 2.4% so far this year, closing at $8.40 yesterday.
And TGG Global will be in view after the Australian Financial Review’s Street Talk column reported the produce firm is considering breaking up its fresh division and sell the pieces as controlling shareholder BayWa seeks to shore up its ailing balance sheet.
Reporting by Paul McBeth. Image from KDavid Montero on Unsplash.
