European stock futures rose after the U.S. announced the restoration of military aid to Ukraine. The euro reached its highest level since October, while the ruble strengthened. The S&P 500 narrowly avoided a significant decline amid tariff concerns and political instability, leading to a sell-off in retailer stocks. Delta Air Lines cut profit forecasts, and the Canadian dollar rebounded after hitting a weekly low. Anticipation surrounds upcoming U.S. inflation data and a central bank meeting in Canada.
European Markets React to U.S. Aid Announcement
European stock futures experienced a notable uptick, rising by 0.8%, while FTSE futures increased by 0.3%. This surge followed the announcement from the United States regarding the restoration of military aid and intelligence sharing with Ukraine, coinciding with Ukraine’s acceptance of a U.S. ceasefire proposal.
As of now, Russia has not issued a response to these developments.
Currency Movements and Stock Performance
The euro soared to its highest point since October, reaching $1.0947 in New York, and maintained stability at $1.0913 during trading in Asia. Additionally, the Russian ruble achieved its strongest position in seven months last night.
The broader MSCI index reflecting Asia-Pacific stocks, excluding Japan, saw a 0.2% increase. Markets in Hong Kong and China remained relatively stable, while the Japanese Nikkei managed to hold steady after experiencing a drop to a near six-month low the previous day.
On Wall Street, the S&P 500 narrowly evaded a 10% decline from its record closing in February, finishing a turbulent session down approximately 0.8%.
In the realm of tariffs, President Donald Trump initially threatened to double tariffs on steel and aluminum imports from Canada to 50%. However, he later reversed this decision after Ontario put a halt to its surcharge on exported electricity.
As a result, the dollar faced a decline, Treasury bonds saw a rally, and the stock market encountered its most significant sell-off in months, as traders expressed concerns that tariffs and political instability could adversely affect U.S. economic growth.
Catriona Burns, a senior fund manager at Wilson Asset Management in Australia, commented on the situation, stating, “He is clearly trying to rebalance the economy in favor of America.” She further noted, “This interim phase is quite dynamic, and the uncertainty surrounding tariffs complicates decision-making.” The potential short-term effects on U.S. growth will be interesting to observe.
The travel sector faced significant challenges as Delta Air Lines significantly reduced its profit forecast. Rivals United and American Airlines also cautioned about declining government bookings and overall demand uncertainty.
Investor apprehension regarding the economy led to a sharp decline in retailer stocks. Notably, Dick’s Sporting Goods experienced a 5.7% drop due to a bleak outlook, while Kohl’s Corp shares plummeted 24% following a reported sales decrease.
Later today, tariffs on steel and aluminum are set to be implemented, and U.S. inflation data for February is anticipated, although it may be too early to gauge the tariffs’ impact.
A central bank meeting in Canada is highly anticipated, as market participants will be eager to hear the views of monetary policy officials amidst Trump’s trade initiatives. A seventh consecutive rate cut, which was considered equally likely just two weeks ago, is now being factored into market expectations.
The Canadian dollar hit a weekly low last night but has since rebounded to CAD 1.443. U.S. stock futures have remained generally stable during this period.
Meanwhile, the yen has moved away from a five-month high, trading around 148 to the dollar. The risk-sensitive Australian dollar is positioned just below 63 U.S. cents, and Brent crude futures are being held just below $70 a barrel.