Wall Street’s record-breaking fondness for breaking record all time highs in succession is finally over. At least for now. The big thing to note this week: according to Bloomberg, the Mag 7 index is in a correction – having fallen -16% from its Dec 17 peak.
What’s changed? An abundance of certainty. Trump has followed through on his warnings Americans might experience ‘short-term’ pain – in fact, under Trump 2.0, he’s hardly pointing towards Wall Street as a metric for success at all.
Like Chevron (forced to leave Venezuela) and US arms manufacturers (indirectly hit for now by a shutdown of aid to Ukraine,) Wall Street – another entity whose overall vibe is in line with what the GOP traditionally supports – has been told to take a backseat.
In turn, the ASX200 traded below 8,000pts on Friday intraday, taking YTD returns down over -2%. Thanks to OPEC+’s production boosts, the energy index (XEJ) has been slammed -7.6%.
Wall Street haunts the ASX
It feels like we were only just enjoying a new record high over 8,500pts, and now it’s been snatched away from us. And if the Mag 7 is in correction, well, that doesn’t bode well for the ASX. Many people of the bearish philosophy have likely long been waiting for this to happen.
Others might blame Trump, which is hard to write around. But I’ve been seduced by analysis from one punter at MarketWatch who imagines Trump is trying to devalue the USD, which, to be fair, is the only way tariffs can work, in the sense of companies coming to America.
(The last time America tried this, domestic production only increased 6%.)
Still, for American manufacturing to be competitive, the USD needs to weaken against other currencies – and that could be why Trump isn’t talking about the dollar or the market right now.
Tariffs are also why American Hot Rolled Coil steel futures are double that of China’s, despite getting most imports from Canada and Mexico – read the room right, and markets are pricing in a domestic steel shortage in the US.
Thanks, tariffs. Or maybe it’s more realistic to hear this being said in the Oval Office: woops. Assuming that tanking the dollar isn’t part of the plan.
Speedrun of what matters
The big thing in commodities is that OPEC+ have lifted production cuts, going back to production boosts – you can see that in the crude price. Trump’s “investigations” into copper markets roll on; the community still expects tariffs sooner rather than later.
Looking at the ASX, Star looks like it’s resolutely fucked; Mesoblast’s decline is seeping into other biotech darlings, MinRes shares are at a 5Y low. Suncorp could end up with the short end of the stick after Alfred gets done wrecking the east coast.
China is still announcing stimulus to mixed reaction, that one’s a wait-and-see. The ECB cut rates once again – coupled with the European defence stock rally, it’s looking like Europe might be the place to be right now.
Trump’s weird fascination with the Panama Canal continues, BlackRock have bought two ports there to counter Chinese influence, or something. No word on Greenland yet but Energy Transition Minerals (ASX:ETM) holders remain bullish. At least, to the tune of 7cps.
Further, Australia’s tipped for another year of record wheat crops – at the cost of affordable lamb, given declining sheep farmers in the country. Compare the price of a whole chook to the price of four forequarter chops, or god forbid, cutlets.
That’s me for this week – see you on Monday.
Australian Equities
- Mesoblast’s run appears to be over as stocks fall -20% MoM
- Star Entertainment fails to report financial results for second time
- MinRes share price hits 5Y low
- Suncorp tipped as most exposed to potential Cyclone Alfred claims
Australian Economy
- Oz economy grew +0.6% in Q4CY2024, but well off pre-COVID levels
- Retail sales for January come in at +0.3%
- Eraring coal plant, due to aging-related failures, reportedly driving up power costs
International Equities
- Bloomberg’s Mag 7 index down -16% since mid-Dec 2024
- Both US and Canadian markets fall after Trump announces tariffs
- TSMC shares dip after announcing Trump-appeasing US$100B spend program
International Economies
- China unveils another stimulus package once again targeting +5% GDP growth for 2025
- ECB cuts rates again late week to 2.65%
- Europe core flash inflation rate YoY falls to 2.6%
Commodities
- OPEC+ finally reverses oil output cut strategy, to boost by millions of barrels a day
- Brent Crude dips below US$70/bbl on Thurs; scrapes 4Y low
- Australia tipped to produce 30Mt of wheat in 2025/6 season after bumper last year
Geopolitics
- Europe unveils €800B defence stimulus plan
- Trump suspends tariffs on some CAN, MEX automakers for one month
- US BlackRock draft US$23B deal to buy two ‘China-linked’ ports in Panama Canal