Australian futures are pointing to a soft day for the trans-Tasman markets after stocks on Wall Street sank on Friday amid heightened fears about the strength of the US economy.
The S&P 500 dropped 1.7% on Friday as investors were spooked by an unexpectedly weak services activity indicator, adding to fears about the strength of the US.
The Chicago Board Options Exchange’s volatility index, known as Wall Street’s fear gauge, spiked 16% to 18.21, its highest level in three weeks, weighing on investors' appetite for risk-sensitive assets. The kiwi fell to 57.42 US cents at 7am in Auckland from 57.68 cents on Friday, and futures are pointing to a 0.8% decline for Australia’s S&P/ASX 200 index today.
“US equities fell sharply, and treasuries rallied amid rising investor risk aversion, after weaker than expected activity in the services sector raised concerns that political uncertainty is weighing on growth,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note. “The recent weakness in activity readings has seen the US economic surprise index drop into negative territory.”
US President Donald Trump’s latest tariff move is to reopen investigations into targeting imports from countries that levy digital services taxes on US firms.
Germany decides
Meanwhile, Germany has voted for change with chancellor Olaf Scholz conceding defeat in Sunday’s snap election, with exit polls showing the opposition conservative CDU/CSU are set to win the biggest share of the vote with 28.5%, followed by Alternative for Germany at 20%. The ruling Social Democrats is on track for its worst result since World War II, with almost 17% of the vote.
The New Zealand dollar traded at 54.89 euro cents from 54.92 cents last week.
Investors are eyeing up Nvidia’s result later this week for more signs that the case for investment in artificial intelligence and its infrastructure remains intact after the emergence of Chinese startup DeepSeek.
Warren Buffett’s Berkshire Hathaway reported record annual profit on Saturday, and increased its cash holdings to US$334.2 billion. In his annual letter to investors, Buffett said the investment firm will probably increase its stakes in the five Japanese trading houses it holds after Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo agreed to relax their caps on how much Berkshire Hathaway can own.
Singapore announced a set of measures to revive its equities market on Friday, with a S$5 billion programme partnering with fund managers to invest in domestic stocks and a 20% tax rebate on primary listings in an effort to attract new listings and stoke liquidity.
New Zealand’s NZX reported a 21% increase in annual earnings on Friday and signalled increased earnings for 2025, with optimism that the shift in global markets and regulatory tweaks will encourage more activity on the local bourse.
In local data today, Statistics New Zealand will release the December quarter retail trade survey, while corporate earnings season continues with Chorus, Steel & Tube Holdings, and Millennium & Copthorne Hotels New Zealand scheduled to report.
Reporting by Paul McBeth. Image from Maheshkumar Painam on Unsplash.
