US stocks were trending higher until Trump announced tariffs on Canada, Mexico and China and that downward trend will flow through to the ASX today.
ASX 200 futures are down 101pts (-1.20%) as of 8:30 am AEDT.
The poor start to the week for local markets comes after a strong finish to last week when the ASX200 finished 123 points (1.47%) higher at 8,493, driven by expectations that the Reserve Bank of Australia (RBA) will cut rates in February following a tepid inflation reading.
“Following last week's gains, the ASX200 ruled off January with a 4.57% gain. While a strong January statistically points to a positive year ahead, a word of warning: a good start to the year doesn’t guarantee it will be all one-way traffic," noted IG Markets analyst Tony Sycamore.
"As a reminder, back in 2023, after a strong January, the ASX200 then fell almost 9% over the next two months as the COVID reopening euphoria in China turned to disappointment.
“This week, the main highlight of the local data calendar is December's Retail Sales, which is also the last key data point ahead of the RBA’s February Board meeting.
"The market is looking for a fall of -0.7% for the month. The Australian interest rate market is pricing in a cumulative 84bp of RBA rate cuts this year, which would see the cash rate end the year at 3.50%.”
Turbulent week in the US
Trump’s trade war caused great turbulence in the US over the weekend. The president will implement a 25% tariff on imports from Mexico and Canada (10% tariff on Canadian energy) and an additional 10% tariff on China.
Canada and Mexico have since announced plans to impose retaliatory tariffs on US goods, despite a warning that the US will double tariffs if any retaliation occurs.
"With the first shots of the 2025 Trade War now exchanged, the world is watching closely to see how the US will respond to Canada's and Mexico's retaliatory tariff announcements. As well as how China will react to its new and unwelcome 10% tariff. Initial thoughts are Chinese authorities will allow the CNY to soften and announce new stimulus measures,” Sycamore wrote.
“At this stage, key equity appears set for a challenging start to the week. Trading on IG Weekends Markets points to a -1.76% fall in Nasdaq equity futures upon their reopening tomorrow and a -0.82% fall in the Dow Jones futures.
“Away from tariffs, the Q4 US earnings season rolls on this week with reports set to drop from Palantir, Alphabet, MicroStrategy and Amazon. We also get non-farm payrolls for January. The preliminary expectation is that the US economy will add 170,000 jobs and the unemployment rate will remain at 4.1%, which would help reinforce the idea that the Fed is on hold until mid-year.”
In Europe
Despite the tariffs affecting US markets and the likely effect on our own market today stocks in the UK finished higher. The FTSE 100 Index added 0.3% to 8,673.96. In Europe, shares closed mixed. Germany's DAX was unchanged at 21,732.05, and France's CAC 40 climbed 0.1% to 7,950.17.
What about small caps?
The S&P/ASX Small Ordinaries finished high on Friday, closing 1.13% higher at 3,234,00. For the five days, the index was up 1.29%.
The week was marked by a flurry of quarterly reports and those continue to trickle through today.
- Polymetals Resources Ltd has provided its second activities update on the restart of the Endeavor Silver Zinc Mine, focusing on capital-efficient and timely refurbishment to meet the targeted cash flow in the first half of 2025.
- Astral Resources NL and Maximus Resources Ltd have entered into a Bid Implementation Deed (BID) for an all-scrip, off-market takeover offer. Under the agreement, Astral will offer to acquire all remaining issued ordinary shares of Maximus that it does not already own.
- Orthocell Ltd has submitted an application to Health Canada (HC) for a Medical Device Licence (MDL) to sell its leading nerve repair product Remplir™ into the US$75 million Canadian nerve repair market.
Meanwhile, the quarterlies continue to roll in, with Artemis Resources Ltd, Cadoux Ltd, Forrestania Resources Ltd, Lithium Energy Ltd, Lithium Universe Ltd, Recce Pharmaceuticals Ltd, Riversgold Ltd, Argent Biopharmaceuticals Ltd and Spenda Ltd all releasing their numbers and news.