Trump's Trade War Triggers ASX's Worst Day in 5 Months

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The Australian sharemarket suffered its largest intraday decline in five months on Monday, with the S&P/ASX 200 index falling 1.79% to 8,379.4 points as investors reacted to U.S. President Trump's new tariff announcements. All sectors finished lower, with Consumer Discretionary (-2.06%) and Healthcare (-2.26%) stocks dropping more than 2%.

The sell-off was triggered by Trump's order imposing 25% tariffs on Canadian and Mexican imports and 10% on Chinese goods, sparking concerns about a global trade war. The uncertainty surrounding trade tensions and future policy moves pushed the Australian dollar to a five-year low below US61¢.

Major stocks felt the impact, with Commonwealth Bank falling 1.5% after dropping more than 2% initially. The broad market decline reflected investor concerns about the tariffs' potential impact on Australian exports and global trade relationships.

Company News

• Cettire's (-18.97%) shares fell despite an announcement stating it has minimal exposure to the new U.S. tariffs, with only 7.5% of its U.S. sales and 4% of total gross sales involving products from affected countries. The luxury online retailer has no direct supplier agreements in Canada, Mexico, or China and has already begun developing mitigation strategies throughout 2024.

• Fisher & Paykel Healthcare (-7.42%) shares fell after warning of increased costs in FY26 due to new U.S. tariffs on Mexican imports. With 45% of production in Mexico and 43% of revenue from the U.S., the company expects no material impact in FY25 but anticipates cost pressures next year.

• Resolute Mining (-9.64%) shares fell following the immediate departure of CEO Terry Holohan, who previously made headlines for his detention by Mali's junta.

• Westgold (-12.40%) shares plunged after significantly reducing its FY25 production guidance to 330,000-350,000 ounces from 400,000-420,000 ounces due to slower-than-expected ramp-up at two mining assets.

   

Wall Street

U.S. markets declined on Friday, with the Dow falling 0.75%, the S&P 500 dropping 0.50%, and the Nasdaq lost 0.28%. The losses come after President Trump announced new tariffs on Canadian, Mexican, and Chinese imports, adding uncertainty about economic and inflation outlooks.

Despite Friday's decline, markets posted strong gains for January, with the Dow up 4.7%, the S&P 500 rising 2.7%, and the Nasdaq advancing 1.6%. The Energy (-2.74%) sector led Friday's losses, with Chevron dropping 4.56% and Exxon falling 2.50% following disappointing quarterly results.

Atlassian (+14.9%) shares surged to a 52-week high after reporting Q2 earnings of 96 cents per share and revenue of $1.29 billion, exceeding estimates. Strong cloud and data centre growth, driven by AI adoption, boosted subscription revenue by 30%. Walgreens Boots Alliance (-10.30%) shares dropped following its decision to suspend quarterly dividend payments, as the pharmacy chain focuses on strengthening its financial position through debt reduction and cash flow improvements during its ongoing turnaround efforts.

S&P500 Sector Performance

Economic Data

• Australian Retail Sales fell by 0.1% month-on-month in December 2024, marking the first decline in nine months, though the drop was milder than the forecasted 0.7% contraction.

• Canadian GDP expanded by 0.2% from the previous month in December 2024, with strong support from retail trade, manufacturing, and construction.

• China's Manufacturing PMI was 50.1 in January 2025, less than the market consensus and December's print of 50.5.

• The U.S. Personal Consumption Expenditure (PCE) price index increased by 0.3% month-over-month in December 2024, the highest gain in eight months, compared to a 0.1% gain in November, and in line with expectations.

• South Korean Exports dropped by 10.3% YoY to a 2-year low of USD$49.12 billion in January 2025, softer than market forecasts of a 13.5% plunge, reversing sharply from a 6.6% growth in the prior month.

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🌎️ Around The Globe

• Amazon has reportedly resumed increased advertising on X, despite previously reducing spending along with other major companies like Apple over hate speech concerns following Elon Musk's 2022 acquisition of the platform.

• Donald Trump has signed an emergency economic order implementing tariffs on major trading partners: 10% on Chinese imports and 25% on Mexican and Canadian goods (except Canadian energy at 10%). The measures aim to combat fentanyl trafficking and illegal immigration using the International Emergency Economic Powers Act.

• Google briefly introduced Gemini 2.0 Pro Experimental to Advanced users, offering improved coding and math capabilities accuracy, before removing it from the changelog.

• Norway's Government Pension Fund Global has increased its indirect Bitcoin exposure to 3,821 BTC through investments in major corporate Bitcoin holders. This represents a 153% increase from 2023, with 1,375 BTC added since June 2024.

• Sam Bankman-Fried's parents are reportedly seeking a presidential pardon from the Trump administration for their son's 25-year prison sentence. Sources say they've met with lawyers about potential clemency following SBF's conviction for fraud related to FTX's 2022 collapse.

• SoftBank is negotiating a potential $25 billion investment in OpenAI, making it the A.I. company's largest investor. The talks follow SoftBank's recent $500 million investment and a $1.5 billion employee share purchase, with founder Masayoshi Son reportedly pushing for a larger stake.

• Toyota remained the world's largest automaker in 2024, selling 10.8 million vehicles despite a 3.7% decline from 2023's 11.2 million units. The drop, its first in two years, was primarily due to safety scandal impacts in its home market of Japan.

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*1-year, 3-year and 5-year returns are calculated as of December 31, 2024.

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