4 Apr 2025
US reciprocal tariffs spook investors
Markets
- Local and global equity markets fell sharply later in the week as investors grew uneasy following the release of US reciprocal tariffs.
- In contrast, government bond yields fell sharply (prices higher) as investors flocked into bonds seeking safety.
- In local stock news, the exchange operator the ASX came under pressure after the markets regulator and the central bank identified serious issues related to trade settlement they said needed immediate action to resolve.
- Rio Tinto shares rose after Norway’s sovereign wealth fund announced it would oppose a review of the miner’s dual listings in London and Sydney.
- Star Entertainment failed to secure a $750 million lifeline from Salter Brothers, putting the operator of casinos and hotels in Sydney, Brisbane and Gold Coast at risk of collapse for the third time in three months.
- The oil price fell sharply with concerns US President Trump’s tariff announcements could result in economic contraction and hence less demand for oil.
- The Aussie dollar rose as the US dollar saw weakness with traders increasing their bets on more US Fed rate cuts this year as US recession probabilities rise.
Economics
- The RBA left the cash rate on hold at 4.10% as expected, with the statement highlighting concerns regarding the global economic outlook but also patience from the Board regarding future rate cuts.
- Australian job vacancies fell by 4.5% to 329,000 in the three months to February 2025. Vacancies are 9.2% lower than a year ago and 30% lower than the peak in May 2022.
- Australian private sector credit growth was 0.5% in February with annual growth accelerating to 6.5% for the year. Business credit growth continues to exceed expectations, rising by 0.8% in the month with annual growth sitting at 9%.
- Australian housing credit growth rose by 0.4% in February to be 5.6% higher for the year, with home prices for March up 0.4%. Clearly the RBA’s rate cut has spurred the property market higher, with two consecutive months of gains and national home prices reaching fresh record highs.
- Australian retail trade rose by 0.2% in February which saw the annual rate ease to 3.6%. Department stores saw the biggest rise, up by 1.5% in the month with mixed results in other categories. Positive data, but clearly some caution shown by consumers.
- The US central bank’s preferred inflation measure, the core PCE, lifted 0.4% in February with the annual growth rate firming to 2.8% from 2.7% previously. The February print came in above expectations.
- US job openings fell by 194,000 in February, whilst private payroll jobs increased 155,000 in March coming in well above expectations.
- US personal income rose by 0.8% in February, well above expectations, with spending up 0.4%.
- A key US consumer sentiment index fell in March to a more than two-year low.
- US factory activity contracted in March for the first time this year and prices accelerated sharply for a second month, whilst a key services manufacturing index eased as expected.
- The number of unemployed people in Germany rose by 26,000 in March, the fastest rate since October 2024. The rise in March was above expectations.
Politics
- US President Trump announced reciprocal tariffs against all countries, coming in well above expectations. The level of duties will generally be half of what US officials judge current tariffs and trade barriers against the US to be. There will be a 10% baseline tariff on all countries and a 25% duty on vehicle imports. Australia received the baseline 10% tariff on all goods, whilst a 25% tariff had already been implemented on aluminium and steel.
- US President Donald Trump threatened secondary tariffs on Russian oil if a ceasefire with Ukraine can’t be reached.
- France’s main opposition party leader Marine Le Pen was found guilty in an embezzlement case involving European Union funds and handed an electoral ban.
- China held military exercises around Taiwan involving the most naval vessels in almost a year. The latest move comes after two separate reports of Chinese warships patrolling the east coast and south coast of Australia.
- Israel is expanding military operations in Gaza, days after asking people in the southern parts of Palestine to leave as it prepares for more intense fighting with Hamas.
- Tensions between the US and Iran rose as the US ordered additional forces to the Middle East in order to strike against Iran-backed Houthi rebels whilst rhetoric regarding Iran’s nuclear program turned more aggressive.
If you would like to discuss any of the information or meet with us, please feel free to call or email us by clicking here.
General Advice Warning - Any advice included in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation or needs.
