The ASX is braced for further pain as Donald Trump threatens 200 per cent tariffs on EU alcohol.
ASX 200 futures are down 0.2% to 7741 points after US trading ended, with US index S&P in correction territory.
The ASX200 closed 37 points lower (-0.48%) yesterday at 7,749, extending its recent losing streak to 15 declines in the past 19 sessions. The Consumer Staples (-0.94%), Consumer Discretionary (-0.68%), and Financials (-0.65%)sectors led the losses, while Real Estate (+0.02%), Information Technology (-0.05%), and Industrials (-0.05%)outperformed relative to the broader market.
The index attempted to rally, reaching an intraday high of 7,821, before reversing course following a downgrade of Australian equities to "Underweight" by a major US investment bank. The downgrade cited concerns over Australia’s vulnerability to trade war risks and elevated valuations, which pressured sentiment.
Adding to the cautious outlook, Wednesday night’s US CPI report revealed persistent goods inflation, prompting economists to revise their forecasts upward for Core Personal Consumption Expenditures (PCE). If these estimates hold, the three-month seasonally adjusted Core PCE rate could rise to 3.3% in February, up from 2.4% in January. Meanwhile, the potential inflationary impact of tariffs has yet to materialise, leaving further price pressures on the horizon.
“Some caution ahead of the weekend, keeping in mind that the last three Fridays have been a grizzly bears picnic,” notes IG Markets analyst Tony Sycamore
“Despite a strong 4% rise in the Westpac Consumer Sentiment Index earlier this week, consumer-facing stocks on the ASX200 struggled again yesterday. There has been a huge flow of headlines of late around the trade war and the wealth destruction caused by sharp falls in the stock market. The assumption is households are set tighten their belts in response. Cettire dropped 4.37% to $0.88, Myer fell 3.90 % to $0.74c, and Kogan finished 3.59% lower at $4.56.”
Looking at the small cap index, the S&P Small Ordinaries (XSO) gained 0.17% to 2,964.80. Over the past five days, it is 4.19% to the red.
US markets tumble as S&P 500 enters correction territory
US stock markets closed sharply lower overnight, with the S&P 500 confirming its entry into correction territory as concerns over the escalating US trade war weighed on investor sentiment. The market decline was driven by fears that heightened trade tensions could reignite inflation and push the US economy into recession.
Adding to market uncertainty, the European Union retaliated against US tariffs on steel and aluminium by imposing a 50% tax on American whiskey exports. In response, President Donald Trump warned of a potential 200% tariff on European wines and spirits.
On the economic front, the Producer Price Index (PPI) rose 3.2% year-on-year (YoY) in February, easing from a revised 3.7% in January. The Core PPI, which excludes volatile food and energy prices, increased 3.4% YoY, down from a revised 3.8% previously. While the overall figures suggest some moderation, certain components were hotter than the headline numbers indicate, raising concerns about a stronger-than-expected Core Personal Consumption Expenditures (PCE) Price Index report due in two weeks.
In corporate news, Adobe shares plunged 13.8% to US$60.76 following a weak revenue forecast, while Intel surged 14.6% to US$23.70 after announcing a new chief executive officer. Among the so-called Magnificent Seven, Apple declined 3.4% to US$209.68, and Tesla fell 3% to US$240.68, remaining well below its 200-day moving average of US$282.33.
“Looking ahead, all eyes will be on tonight's University of Michigan Consumer Sentiment index, with expectations of a fall to 63.1 from 64.7 previously, which would be the weakest reading since November 2023. The US rates market is fully priced for a 25bp Fed rate cut in June and prices a cumulative 73bp of Fed rate cuts this year,” Sycamore said.
Asia and Europe close lower
Chinese equities closed lower, with the Shanghai Composite Index slipping 0.4% to 3,358.73 and the Shenzhen Composite Index down 1.1% to 2,066.95.
In Hong Kong, the Hang Seng Index declined 0.6% to 23,462.65.
Japan’s Nikkei Stock Average edged down 0.1% to 36,790.03, while India’s BSE SENSEX fell 0.3% to 73,828.91.
In Europe, the FTSE 100 in the United Kingdom finished flat at 8,542.56.
Across Europe, markets ended lower, with Germany’s DAX falling 0.5% to 22,567.14 and France’s CAC 40 declining 0.6% to 7,938.21.