Stocks on Wall Street sank as US Federal Reserve chair Jerome Powell said what everybody thought - the tariff regime was bigger than anyone expected.
The tech-heavy Nasdaq Composite dropped 4% in afternoon trading, with Powell’s comments adding to a downbeat tone following a 10% slump for Nvidia after the chipmaker warned of a US$5.5 billion charge from needing a licence to export its H20 processors to China and other countries.
That heightened uncertainty will likely weigh on New Zealand’s tech stocks which – while largely sidestepping direct costs from the tariff regime – have underperformed the benchmark NZX index.
Powell said the US economy is still in good shape, but showing signs of slowing, and that the tariff regime will weigh while also adding inflationary pressures.
“Fed chair Powell spoke at the Economic Club of Chicago and reiterated that the central bank is in no hurry to change policy,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “He acknowledged that a weakening economy and elevated inflation could bring the Fed’s dual goals of maximum employment and stable prices into conflict and that the central bank would consider the economy’s distance from each goal if that scenario occurs.”
Advertising agency Omnicom pared back its growth outlook for the year, saying it was unsure how the tariff regime will affect clients’ marketing spending.
Inflating expectations
Statistics New Zealand releases its March quarter consumers price index, which is expected to show a small pickup in the annual pace of inflation to 2.4%.
The kiwi dollar traded at 59.26 US cents at 7am in Auckland from 59.19 cents yesterday.
The World Trade Organisation expects the volume of goods trade to fall this year, with US President Donald Trump’s tariff programme threatening to cause a sharp decline.
Trucking company JB Hunt Transport Services sank after reporting weaker revenue and profit in the March quarter, blaming softer demand from retailers over the tariff programme. NZX-listed logistics group Mainfreight will report its annual earnings in May.
Abbot Laboratories boosted first-quarter earnings, but refrained from raising annual guidance due to the looming cost increases from the tariff war.
Across the Atlantic, stock markets were mixed as the UK’s FTSE 100 gained 0.3% and Germany’s DAX 30 advanced 0.3%, while France’s CAC 40 declined 0.1%.
Italian fashion firm Brunello Cucinelli lifted earnings in line with analysts’ expectations and Moncler beat projections, with the luxury sector under the microscope after LVMH Moët Hennessy Louis Vuitton's result this week disappointed investors.
And Dutch brewer Heineken was cautious about its outlook, even after beating expectations.
Australian futures are pointing to a 0.4% decline on the S&P/ASX 200 index amid the heightened uncertainty, although surging gold prices may provide a support for mining companies with several reporting quarterly results today. Gold futures prices climbed 3.6% to US$3,356 an ounce at 7am in Auckland.
Reporting by Paul McBeth. Image from Joshua Hoehne on Unsplash.
