Josh Gilbert, Market Analyst at eToro, shares his three things to watch in Australia in the coming days.
AU consumer confidence (TUESDAY AM)
Today, we’ll get to see how the RBA’s first rate cut in more than four years has influenced consumer confidence, and if sentiment has increased since the cautious optimism we saw in February, when it bumped up 0.1%, rising from 92.1 in January to 92.2.
Australia’s monthly headline inflation for January came in slightly lower than forecast at 2.5%, but trimmed mean inflation picked up to 2.8% from 2.7% in December. Although it didn’t provide a solid indication for the RBA to continue cutting rates, it did offer reassurance that inflation is moving in the right direction, something which will hopefully be reflected in this month’s consumer sentiment index.
Australian retail sales also saw an improvement in January, rising 3.8% compared with January 2024, despite cost of living pressures continuing to squeeze the pockets of consumers. This, paired with the RBA’s interest rate cut and soft CPI data, is a good sign for confidence.
But, on the other hand, tariffs and trade war chatter may be leaving Aussies feeling a little on edge, and the positive boost from tax cuts and rebates may begin to fade. We will find out how confident consumers are despite these factors today.
Tariff Troubles - what it spells for the ASX
President Trump has only been in the White House for a couple of months, but he is already making waves in global markets. Last week, he followed through on his promises by imposing a 25% tariff on imports from Canada and Mexico, while increasing tariffs on Chinese goods from 10% to 20%.
These measures target the United States' three largest trading partners, which together accounted for over 40% of U.S. imports in 2024. Canada and China retaliated with tariffs on US goods, fueling fears of a broader trade war and creating uncertainty about their true economic impact. Markets often ‘front run’ potential outcomes, but investors remain wary of how these trade tensions could affect corporate earnings, economic growth, and overall market volatility.
Industries like car manufacturing, where parts crisscross the US, Mexican, and Canadian borders multiple times before a vehicle is finished, are especially vulnerable. Investors don’t know how companies will adapt, and whether they’ll eat the costs, raise prices, or shift production. Tech stocks have taken the brunt of the sell-off, with Nvidia, a darling of the AI boom, falling over 24% from its recent highs as investors fret over supply chain disruptions and shrinking profit margins. More broadly, the Nasdaq has fallen 7% this year.
Locally, the market continues to look uncertain. Our largest trading partner, China, is at the centre of the tariffs whilst the region slipped back into deflationary territory over the weekend. So far, this escalating tariff war has weighed particularly heavily on oil prices and energy stocks, with oil trading at three-year lows last week. Last week also saw the ASX record its lowest close of the year thanks to market uncertainty in the wake of Trump’s tariffs, closing below 8,000 for the first time in 2025 at 7,948.
US inflation
With Trump’s tariffs coming into effect last week, investors are concerned that these tariffs will reignite US inflation, with February’s CPI set to be released on Wednesday at 8:30 AM ET. The 10% tariffs on goods from China that were implemented in early February will provide some indication of the results to come, reflecting how the increase in pricing of Chinese imports has affected US consumers.
The annual inflation rate in the US increased to 3% in January 2025, compared to 2.9% in December 2024, surpassing market forecasts of 2.9%. This indicated stalled progress in reducing inflation, and market expectations suggest this month will reflect that continued struggle, with the worry over the possibility of ‘stagflation’ rising. Headline inflation is expected to fall to 2.9% from January’s 3%, with core inflation set to ease a touch lower at 3.2%.
This will be exactly what the Fed is hoping to see after last month’s hotter reading. Capital Economics predicts US inflation could climb from 2.9% to as high as 4% if trade war tensions continue to escalate. That has the Federal Reserve on watch, and means the view of no rate cuts this year is a real possibility.