Equities Decline Amid Tariff Concerns, Forex Markets Stabilize

The US stock markets faced another rough session overnight, with the NASDAQ index leading the decrease by nearly -2%. All three major indexes ended the day below their respective 55-week exponential moving averages (EMAs), which underscores the bearish sentiment and indicates that the markets may now be entering a medium-term correction phase. This technical setback highlights increasing downside momentum as investors reassess their outlook amidst rising economic uncertainty, particularly relating to ongoing tariff threats.

The continuing trade war remains a significant factor driving the selloff, as tariff threats appear to escalate almost daily. Analysts believe that the markets have yet to fully absorb the potential negative economic impacts of these developments. The effects of these increasing tensions are expected to last well into the second quarter with reciprocal tariffs set to take effect in April.

Moreover, the European Union has indicated its readiness to retaliate against US tariffs, and similar responses can be anticipated from other countries. Beyond the EU's response, further tariffs are planned targeting China with increased duties, which may also extend to non-border-related tariffs against Canada and Mexico. Japan could also find itself under scrutiny from the US, especially regarding concerns over its weak currency. This widespread approach to tariffs suggests that the current market adjustments could signal the start of a more extensive risk-averse trend. Investors have begun to unload their positions to protect against further uncertainties.

In contrast to the volatility in equity markets, the currency markets have remained relatively stable. Currently, the British Pound is the strongest performer this week, followed by the Euro and the US Dollar. On the negative side, the Swiss Franc is performing the worst, followed by the Canadian Dollar and the Australian Dollar, with the New Zealand Dollar and the Japanese Yen situated in the middle. Nonetheless, most major currency pairs and crosses are still within last week's trading range, indicating that the forex market is in a consolidation phase.

Looking ahead, today’s critical data releases—UK GDP figures and the University of Michigan consumer sentiment and inflation expectations—are being closely monitored. Recently, U.S. consumer sentiment has declined sharply by -10 points in the past two months, showcasing an increasing apprehension regarding tariff policies. A further significant drop in sentiment could elevate recession fears and further deepen the market's risk-averse mood.

In Asia, as of the latest updates, the Nikkei has gained 0.87%. The Hong Kong HSI has risen by 2.33%, and the China Shanghai SSE has increased by 1.71%. However, the Singapore Strait Times shows a slight decline of -0.21%. The 10-year Japanese government bond yield has fallen by 0.018 to 1.528. On Wall Street, the DOW dropped -1.30%, the S&P 500 lost -1.39%, and the NASDAQ fell -1.96%, with the 10-year yield decreasing by -0.044 to 4.274.

New Zealand Manufacturing Index Shows Growth

New Zealand’s BusinessNZ Performance of Manufacturing Index saw an increase from 51.7 to 53.9 in February, marking its highest reading since August 2022. This improvement was driven by gains in production (which rose to 52.4) and new orders (which reached 51.5), both achieving their best results since August 2022. Additionally, employment surged to 54.0, a rise of 3.2 points since January, representing its highest level since September 2021.

Despite this positive data, business sentiment remains cautious. The share of negative feedback from respondents rose to 59.5% in February, up from 57.7% in January. Many manufacturers reported weak orders and sluggish sales as ongoing challenges, indicating that while some expansion has resumed, underlying concerns persist.

BNZ’s Senior Economist, Doug Steel, noted the continued improvement, remarking that the pace of recovery may be quicker than current forecasts suggest.

Gold Prices Reach Record Highs Amid Geopolitical Tensions

Gold prices continued their upward trend overnight, reaching new all-time highs as the precious metal is backed by rising global uncertainties. Investors are flocking to this safe-haven asset, with the psychological level of 3000 now within reach. This surge in gold prices is being fueled by multiple factors, including escalating trade tensions, stagnation in negotiations for a ceasefire between Ukraine and Russia, and the ongoing significant downturn in US stock markets.

Particularly concerning are the latest updates on the ceasefire talks between Russia and Ukraine, which have maintained high levels of uncertainty. Russian President Vladimir Putin expressed conditional agreement to a US-led ceasefire proposal but has not fully endorsed it. He mentioned that further discussions with US President Donald Trump are necessary to ensure the ceasefire results in a sustainable peace and addresses the root causes of the conflict. He also raised skepticism regarding whether the proposed ceasefire would lead to benefits for military preparations.

In response, Trump indicated that initial reports from Russia were positive but emphasized that nothing is certain until the final details are clarified.

Given that the ceasefire agreement is far from confirmed, geopolitical risks continue to loom large.

Technically, the next immediate target for gold pricing is the 61.8% projection level of 2584.24 to 2956.09 calculated from 2832.41, which stands at 3062.21. However, the main challenge will be the medium-term rising channel resistance that has limited price advances since early 2024. A rejection at this level would still keep the bullish trend in gold but may hinder its momentum. Conversely, a decisive breakout beyond this channel resistance could accelerate gold’s upward movement, potentially leading to a target of 3204.26 at a 100% projection level.

Equities, Forex, Sentiment, Trade, Tariffs, Gold