The ASX is set to resume its slide in line with a tumble in US markets overnight. ASX 200 futures are down 71 points (-0.87%) as of 8:30 am AEDT.
The ASX 200 closed 73 points higher (+0.90%) on Monday at 8,245, driven by strength in the Energy (+2.02%), Information Technology (+1.79%) and Materials (+1.63%) sectors. In contrast, Financials (+0.16%), Consumer Staples (+0.32%) and Utilities (+0.71%) underperformed relative to the broader market.
The rebound followed Friday’s gains on Wall Street, an influx of new capital at the start of the month and better-than-expected Chinese manufacturing data, with the Caixin Manufacturing PMI and NBS Manufacturing PMI both exceeding forecasts. The rally came after a 5.25% pullback from the mid-February high of 8,615, aligning with a typical correction for the index.
The Energy and Materials sectors led the charge, benefiting from their China exposure. Viva Energy surged 3.48% to A$1.78, while Beach Energy (ASX:BPT) climbed 2.87% to A$1.43. Among the miners, Mineral Resources rose 5.37% to A$23.93 and Rio Tinto (ASX:RIO) advanced 3.56% to A$117.41.
“The focus today shifts to retail sales data for January, which are expected to rise by 0.3% from -0.1% prior. The minutes from the RBA’s February meeting are likely to reiterate the RBA’s cautious start to its rate-cutting cycle,” IG Markets analyst Tony Sycamore said.
“Ahead of the data, the Australian interest rate market is fully priced for a 25bp RBA rate cut in July and is pricing in a cumulative 56bp of RBA rate cuts for the remainder of 2025.”
Tariffs and weak economic data weigh on US sentiment
US equities opened the week on a volatile note after President Donald Trump confirmed that a 25% tariff on imports from Mexico and Canada along with a 10% levy on Chinese goods would take effect tomorrow.
The announcement coincided with disappointing economic data, as the ISM Manufacturing PMI fell to 50.3 in February 2025, down from 50.9 in January, missing expectations of 50.5.
Timothy Fiore, chair of the ISM, noted that “demand eased, production stabilized and destaffing continued” as businesses responded to the new administration’s trade policies.
Among the sub-indices, new orders posted their sharpest decline since March 2022, dropping to 48.6 from 55.1. Employment slipped into contraction at 47.6, down from 50.3, while price pressures surged to 62.4, the highest level since June 2022, compared to 54.9 in the previous month.
“The closely watched but volatile Atlanta Fed’s GDPNow model revised its Q1 2025 GDP growth estimate significantly lower to -2.8% annualised from last week’s -1.5%, further down from a +2.3% growth rate on February 19,” Sycamore noted.
“The downward revisions reflect consumption being pulled forward ahead of tariffs and cuts by DOGE, which has sapped confidence and potentially impacted the labour market. All of which has resulted in a dovish repricing in the rates market.
"There are now 72bp of Fed rate cuts priced for this year, up from 31bp after the warmer CPI print in mid-February.”
European sharemarkets surge
There were record highs in Europe on Monday, driven by expectations of increased military spending and optimism surrounding a potential Ukraine peace proposal.
Germany’s blue-chip index jumped 2.6%, marking its largest single-day gain since November 2022.
The European aerospace and defence index rose 7.7% to an all-time high with Rheinmetall (ETR:RHMG) surging 13.7%, Italy’s Leonardo climbing 16% and Britain’s BAE Systems (LON:BAES) up 14.5%.
Rolls-Royce (LON:RR) gained 4.4%, while France’s Thales (EPA:TCFP) and Dassault Aviation advanced 16% and 14%, respectively.
- The FTSEurofirst 300 index added 1.1%.
- The UK FTSE 100 index rose 0.7%, both reaching record levels.
Currencies and commodities
Currencies
Currency movements were mixed against the US dollar.
- The euro strengthened from US$1.0390 to US$1.0501, settling near US$1.0485 at the US close.
- The Australian dollar declined from US62.50 cents to US62.02 cents before recovering slightly to US62.20 cents.
- The Japanese yen firmed from JPY151.30 per US dollar to JPY149.11, closing near JPY149.50.
Commodities
Oil prices fell to a 12-week low after Bloomberg reported that OPEC+ plans to revive some suspended production, with a scheduled output increase of 138,000 barrels per day in April.
- Brent crude dropped US$1.19, or 1.6%, to US$71.62 a barrel.
- US Nymex crude declined US$1.39, or 2%, to US$68.37 a barrel.
Base metal prices rose, with copper futures up 1.4% and aluminium gaining 0.2% on stronger Chinese industrial activity.
- Gold futures climbed US$52.60, or 1.8%, to US$2,901.10 an ounce, supported by a weaker US dollar and safe-haven demand amid concerns over US President Donald Trump’s tariff policies. Spot gold traded near US$2,891 at the US close.
- Iron ore futures fell US$1.79, or 1.7%, to US$100.81 a tonne, marking a sixth consecutive decline as US-China trade tensions overshadowed positive Chinese manufacturing data.
What about small caps?
The S&P/ASX Small Ordinaries gained 0.65% to close out the day at 3,157.20. Over the last five days, it has lost 0.90%.
News has trickled in so far.