The Australian sharemarket is expected to open in the red on Tuesday, tracking weaker offshore leads after European equities slumped amid escalating trade tensions between the US and Europe over President Donald Trump’s renewed push to take control of Greenland.
Futures are pointing to a fall of 0.4% or 34 points at the open, following a 0.3% decline on Monday. The S&P/ASX 200 closed 29.4 points lower, down 0.33%.
Technology and communications services stocks bore the brunt of the selling, with Life360 (ASX: 360) down 7.5%, WiseTech Global (ASX: WTC) falling 4.4%, Megaport (ASX: MP1) off 3.5%, Xero (ASX: XRO) down 2.6%, SiteMinder (ASX: SDR) lower by 2.6% and Car Group (ASX: CAR) easing 2.6%.
In contrast, gold stocks continued their strong run. Capricorn Metals (ASX: CMM) gained 4.1%, Genesis Minerals (ASX: GMD) rose 3.7% and Perseus Mining (ASX: PRU) added 3.6%. Strength also flowed into major miners, with Lynas Rare Earths (ASX: LYC) jumping 5.2% and South32 (ASX: S32) up 1.4%.
Wall Street closed
US sharemarkets were closed on Monday for the Martin Luther King Jr. holiday, but equity futures weakened in holiday trading. Futures tied to the Dow Jones Industrial Average fell 401 points or 0.8%, S&P 500 futures slipped 0.9% and Nasdaq 100 futures dropped 1.1%, reflecting concerns over rising trade tensions with Europe.
On Friday, the Dow fell 0.2%, the S&P 500 edged down 0.1% and the Nasdaq also slipped 0.1%.
US government bond markets were closed on Monday. On Friday, the US 10-year Treasury yield rose 7 basis points to 4.23%, while the 2-year yield lifted 3 points to 3.59%.
Europe suffers major decline
European sharemarkets posted their biggest daily decline in two months on Monday after President Trump threatened additional tariffs on eight European countries unless the US is allowed to buy Greenland. Trump said a 10% tariff would be imposed from February 1 on goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and Britain, rising to 25% from June 1 if no deal is reached.
Export-heavy markets led losses, with Germany’s DAX down 1.3% and France’s CAC 40 sliding 1.8%. The FTSEurofirst 300 index fell 1.2%, while the UK’s FTSE 100 eased 0.4%.
Luxury, automobile and technology stocks were among the hardest hit. Volkswagen dropped 2.8%, Porsche fell 2.7% and BMW shed 3.4%. Luxury names also slid, with LVMH down 4.3%, Kering off 4.1%, Hermes lower by 3.5% and Moncler down 2%.
Defence stocks outperformed, with Rheinmetall up 1%, while French aerospace and technology group Thales gained 1.1%. Euro zone equity volatility jumped to its highest level since November.
Currencies
Currencies were mixed against the US dollar.
- The euro rose from US$1.1611 to US$1.1648 and was trading near US$1.1640 late in North American trade.
- The Australian dollar firmed from US66.88 cents to around US67.10 cents.
- The Japanese yen weakened slightly, with the US dollar rising to around JPY158.10.
Commodities
Oil prices were steady as easing civil unrest in Iran reduced immediate supply concerns, while markets monitored geopolitical tensions over Greenland.
- Brent crude settled down US19 cents or 0.3% at US$63.94 a barrel.
- US Nymex crude was unchanged at US$59.44.
Base metals advanced in London trade.
- Copper rose 1.3% on a weaker US dollar and stronger-than-expected Chinese economic data, while aluminium gained 1%.
- Gold surged as investors sought safety. Gold futures jumped US$81.30 or 1.8% to US$4,676.70 an ounce, while spot gold was trading near US$4,670 after hitting a record high of US$4,689.39.
- Iron ore futures slipped US$1.68 or 1.6% to US$104.66 a tonne in Singapore, pressured by ongoing weakness in China’s property sector and concerns over steel demand.
Looking ahead
In Australia, BHP releases an operational review and HUB24 provides a market update. In China, loan prime rates are announced. In the US, earnings are due from 3M, Netflix, United Airlines, Bancorp and KeyCorp.