Trump's Trade Tantrum Hits ASX: Oil Prices Fall

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Welcome to Equity Espresso’s Market Recap.

The S&P/ASX 200 index fell 58.2 points or 0.69% to 8,359.40 on Tuesday, retreating from its record high, with Energy (-3.13%) stocks leading the decline. Major energy companies were hit hard, with Woodside (-3.79%) and Santos (-4.23%) both falling following a 2.8% drop in Brent crude prices to around $US73/bbl amid reports of a potential 60-day ceasefire between Israel and Hezbollah.

Market losses deepened after Trump announced plans to impose tariffs on Chinese goods (10%) and Canadian/Mexican goods (25%); more on that below. Financials (-1.89%) stocks also extended their losses following the trade policy announcement. ASX-listed companies providing services to the U.S. benefited from the tariff news, with Bluescope Steel (+5.55%), Sims (+3.86%) and Reece (+2.20%) some of the beneficiaries

President-elect Donald Trump announced plans to implement significant trade measures upon taking office in January 2025, promising to impose a 25% tariff on all imports from Canada and Mexico until they address concerns about drug trafficking, particularly fentanyl, and border migration. Additionally, Trump outlined plans to impose an extra 10% tariff on Chinese imports, above any existing tariffs, citing concerns about drug trafficking. This announcement drew a response from the Chinese Embassy in Washington, which emphasised that U.S.-China economic cooperation is mutually beneficial and warned against trade wars.

Gold prices declined near $US2,620/oz, following a 3.4% drop in the previous session, pressured by a strengthening dollar and reduced safe-haven demand amid potential Middle East de-escalation, with Israel likely to vote on a Hezbollah ceasefire.

Company News

• ASX's (-4.30%) two-phase upgrade of its CHESS settlement system is expected to cost $270-320 million in its final phase, set to launch in 2029, following a 2026 initial upgrade costing up to $125 million.

• EML Payments (+29.20%) surged after it reported a 46% increase in Underlying EBITDA for Q1 to $11.6 million, re-affirming its FY25 guidance to be in the range of $54-60 million.

• Endeavour Group (+3.73%) plans to test new gaming machine technology in its Victorian hotels in 2025, supporting government efforts to reduce poker machine losses.

• Webjet (-0.60%) reported an 8% drop in bookings to 783,712 in the six months to September, citing domestic travel weakness due to economic pressures. Despite the slowdown, the online travel company posted a slight increase in net profit to $9.2 million following its Web Travel demerger.

Wall Street

Wall Street saw gains across its major indexes on Monday, with the Dow Jones (+0.99%) rising the most, followed by the S&P 500 (+0.30%) and the Nasdaq (+0.27%). The small-cap Russell 2000 index achieved a notable milestone, reaching an all-time intraday high of 2,466.49, driven by falling Treasury yields following Scott Bessent's nomination as U.S. Treasury secretary.

The market's performance was influenced by several factors, including discussions of a potential ceasefire deal between Israel and Lebanon, which led to lower oil prices and a decline in the Energy (-2.01%) sector. Consumer Discretionary (+0.99%) stocks emerged as one of the leading performers, boosted by Amazon's (+2.20%) gain,

Investors continued to be split about the possibilities of the Federal Reserve's December meeting, with the CME Group's FedWatch Tool indicating a 56.2% chance of a 25 basis-point rate cut.

S&P500 Sector Performance

Economic Data

• The Chicago Fed National Activity Index decreased to -0.40 in October 2024, the lowest in nine months, from -0.27 in September and much worse than market forecasts of -0.20.

• Japan’s Services Inflation increased to 1.50% in October from 1.30% in September of 2024.

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Quick Singles

🌎️ Around The Globe

• Amazon has doubled its investment in AI startup Anthropic to $8 billion while remaining a minority investor. The partnership makes AWS Anthropic's primary cloud provider, with Anthropic using AWS chips for its Claude AI models.

• Bluesky's user base has grown significantly from 13 million to 21 million in just one month. The decentralised social platform, which originated as a Twitter spinoff in 2021, is now managed by a small 20-person team working to expand server capacity.

• DirecTV has cancelled its planned acquisition of Echostar's satellite TV business, including Dish TV, due to an unsuccessful debt-exchange offer. The failed merger would have created a major pay-TV distributor serving 20 million subscribers.

• Meta has launched custom feeds in Threads, allowing users to create personalised content streams. The feature lets users combine multiple topics and accounts into dedicated feeds using the "Create new feed" option in the search menu.

• Sony is reportedly developing a portable gaming device capable of playing PlayStation 5 games, aiming to compete with Nintendo in the handheld market.

• TikTok CEO Shou Zi Chew has reportedly reached out to Elon Musk in recent weeks to discuss U.S. matters and tech policy, according to Wall Street Journal's sources.

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

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