Wall Street futures and the dollar slid in Asia on Monday as confusion over US tariffs revived the “sell America” trade, while confidence in the entire AI sector was set to be tested by results from tech-diva Nvidia this week.
Gold gained and oil prices eased ahead of another round of talks between the United States and Iran due in Geneva on Thursday, with the risk of US military strikes lingering if a deal is not done.
Uncertainty loomed large after the US Supreme Court struck down US president Donald Trump’s emergency tariffs, leading him to announce a new 10 per cent rate on the rest of the world, only to then lift it to 15 per cent in a move that even seemed to surprise some of his own officials.
“The tariff landscape is now more uncertain than before, uncertainty is not good news for any economy or market,” said Rodrigo Catril, a senior FX strategist at NAB.
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“Unless common sense prevails, we could be entering a circular process where new tariffs are announced, then potentially overturned, only for new tariffs to be announced, and we do the dance again.”
It was not yet clear when these tariffs would be imposed, what might be excluded and whether every country would be slapped with 15 per cent. Some, including the UK and Australia, had 10 per cent tariff rates under the former rules, while many countries in Asia had higher rates.
With so much up in the air Asian markets were mixed, with MSCI’s broadest index of Asia-Pacific shares outside Japan up 0.9 per cent in light trade.
Japan’s Nikkei was shut for a holiday but futures traded down 0.8 per cent at 56,675 versus a cash close of 56,825.
The chance of lower tariffs helped South Korea extend its bull run with a 0.5 per cent rise, having already jumped 5.5 per cent last week to all-time highs. Taiwan followed with an increase of 1.2 per cent to a record peak.
“From the perspective of most Asian economies, the events of the last few days will lower the effective US tariff rate, at least in the short run,” noted analysts at Goldman Sachs.
“China will enjoy the largest decline, 6.6pp by our estimate, followed by several South and Southeast Asian economies.”
Euro Stoxx 50 futures and Dax futures both eased 0.5 per cent, while FTSE futures fell 0.2 per cent.
S&P 500 futures fell 0.8 per cent and Nasdaq futures dropped 1 per cent ahead of earnings from Nvidia, which are sure to cause waves given the tech behemoth makes up almost 8 per cent of the S&P 500 index.
The world’s most valuable company is expected to post a 71 per cent rise in earnings per share to $7.76, though estimates range from as low as $6.28 to as high as $9.68. Options imply its shares could shift by at least 6 per cent in either direction on the announcement.
The treasury market had been sideswiped by the tariff news as it raised the risk the US government would have to repay around $170 billion in revenue.
Such an outcome would, on paper, widen the fiscal deficit by half a percentage point to around 6.6 per cent of GDP.
The holiday in Japan meant cash treasuries were not trading, but 10-year note futures nudged up 4 ticks as shares slipped.
The market had also been tugged two ways by mixed data with economic growth badly missing forecasts in the December quarter, but core inflation surprising on the high side.
That saw the probability of a June rate cut from the Federal Reserve come in to around 52 per cent, from over 60 per cent a week ago, and had left the dollar firmer on the week.
That changed on Monday with the dollar under pressure amid speculation the chaos over tariffs could shake investor confidence in US assets.
The dollar shed 0.4 per cent on the Japanese yen to 154.40, while the euro added 0.3 per cent to $1.1821.
The dollar also slid 0.5 per cent on the Swiss franc to 0.7724, while the selling spread to Bitcoin which lost 4.3 per cent to $64,698.
In commodity markets, gold gained a safe-haven bid and firmed 1.1 per cent to $5,159 an ounce. Silver climbed 3.2 per cent to $87.25 per ounce, after climbing almost 8 per cent on Friday.
Oil prices were choppy, unwinding some of the gains made last week when Trump said the US military could strike specific targets in Iran amid a large-scale build-up of forces in the region.
Brent fell 1.3 per cent to $70.84 a barrel, while US crude lost 1.3 per cent to $65.61 per barrel. – Reuters
