Dow slammed as Trump targets Mexico with Tariffs

Stock Markets

Australian shares are poised to open lower today as US stocks closed at session lows on Friday after US President Donald Trump said he would impose tariffs on Mexican imports in a border fight with Mexico amid growing concerns regarding the ongoing US/China trade war. The new tariffs will begin at a rate of 5% starting 10 June and will increase by 5% each month thereafter with the potential to reach up to 25% on 1 October if Mexico doesn’t take sufficient actions to stop what Trump describes as a wave of illegal immigrants from Central America. The University of Michigan reported that the consumer sentiment index rose to 100 in May from 97.2 in the prior month, falling below economists’ forecasts of 101.5. The surveys’ chief economist stated that confidence significantly eroded in the last two weeks of May “due to unfavourable references to tariffs”. Australian investors will be focused on the RBA this week, with the central bank releasing its highly anticipated latest interest rates decision on Tuesday afternoon. Economists are widely expecting a 25-basis-point cut, which would be the first rate cut since mid-2016.

Wall Street’s major indexes closed lower on Friday, as bearish sentiment grew on Trumps’ intention to weaponize tariffs on Mexican imports. The Dow Jones, S&P 500 and Nasdaq lost 354.84 (-1.41%), 36.8 (-1.32%) and 114.568 (-1.51%) points respectively.

The benchmark S&P/ASX200 index closed 4.728 (+0.07%) points higher on Friday after a last-minute rally pushed the index into positive territory. The index was down 0.92% for the week and was up 0.96% for the month of May.

ASX 200 futures are currently down 24 points.

Today’s data releases:  AiG performance of manufacturing May, CoreLogic dwelling prices May, MI inflation May, ANZ job ads May, Business indicators first quarter;  China Caixin manufacturing PMI May; Japan capital spending first quarter, Nikkei PMI manufacturing May final; UK Markit manufacturing PMI May; US Markit manufacturing PMI May final, ISM manufacturing May, Construction spending April.

Commodities & Currencies

Oil prices slid on fresh trade worries after US President Donald Trump stoked global trade tensions by threatening tariffs on Mexico, which is one of the largest US trade partners and a major supplier of crude oil. WTI and Brent crude are currently sitting at US$52.45 (-1.96%) and US$60.82 (-1.17%) per barrel respectively.

Iron ore prices are currently down 2.2% at US$101.60 a tonne.

The spot price of gold is currently up 1.53% at US$1308.31 an ounce.

The AUD is currently down 0.09% at US69.32¢.

This article was written by Mithun Fernando – Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via mithun.fernando@rivkin.com.au or by phoning +612 8302 3633.