Stocks Plunge into a Sea of Red as Tariffs Take Effects

This morning, President Trump indicated that 25% tariffs on Canada and Mexico would commence later today, with an additional 10% on China imports. Wall Street slumped. US stocks were already on the back foot after US manufacturing data eased, with a notable rise in pricing components and a retreat in the employment component.

The Nasdaq slumped by 2.64%, the S&P 500 fell 1.75%, and the Dow Jones retreated 1.47% lower. Notably, the US dollar and digital assets also retreated; oil prices slumped over 2.0%, while gold prices rose, remaining the favoured Trump haven trade.

The data calendar is thin in Asia, with the RBA Minutes of only passing interest now. Asian markets will monitor headline action from China's "two sessions" meetings, but they will focus on digesting the implications of the US tariffs. Asian equities and currencies could come under sustained pressure as investors ponder "who is next?”

Most notable for me is the complete lack of "Trump trade" flows overnight now that tariffs are finally here. The difference in sentiment could not be more stark than the market reaction weeks ago when the White House first proposed the tariffs.

After a brief false dawn last week, the Nasdaq has joined the S&P 500 and Dow Jones in downward correction territory, closing below the daily support line at 20,540.00. The rising wedge resistance is 21,380.00, with initial support at the 200-day moving average (DMA) at 20,311.00. Failure signals a test of multi-year support today at 19,650.00.

As markets price in recessionary headwinds of a global trade war, oil prices are, unsurprisingly, in the firing line as markets predict weakening demand. Brent and WTI were stuck in correction territory last week, but the technical picture now suggests the risks of a much deeper slump are spiralling higher.

Brent crude closed 2.15% lower at $71.45 a barrel overnight, closing below multi-month support at $72.00, which is now resistance. The September low at $68.60 may provide interim support, but the technical picture is signalling a material retreat; targeting the $62.00 region is now possible.

WTI slumped by 2.20% to $68.35 overnight, closing below multi-month support at $68.60. The technical picture is similar to Brent crude, with the potential for a material correction lower, targeting $58.00 a barrel. Notably, both contracts' Relative Strength Indexes (RSI) are not oversold, heightening the bearish risk.

Gold is clearly the favoured haven trade right now, prices climbing by 1.25% to $2,893.00 an ounce overnight, even as other "alternative asset" trades cratered. Initial support is at $2,830.00. Gold is trying to regain the rising wedge with resistance near $2,900.00. That would set up another test of the multi-day all-time highs around $2,900.00, with the yellow metal potentially able to break $3,000.00.

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