Market Briefing: Tech tumbles
Read the 2025 Currency Outlook from Corpay Currency Research
Equity pressure. AI news out of China weighed on US tech stocks. The 7 US megacaps have driven the overall market strength the past few years.
Spill-overs. Risk off tone in equities washed through other markets. Bond yields fell as did oil. JPY outperformed while AUD & NZD slipped back a bit.
Event radar. Locally, Q4 CPI in focus this week (Weds). Offshore, the US Fed, Bank of Canada, & ECB meet. Tech stocks also report earnings.
Global Trends
Some nervousness returned to markets after what had been a relatively more positive period last week. US equities kicked off the new week on the backfoot with the S&P500 (-1.9%) and tech-focused NASDAQ (-3.4%) losing ground. This is one of largest one-day slides in the NASDAQ since Q4 2022. Chipmakers, an underlying driver of overall market performance, have come under pressure after a Chinese company (“Deepseek”) revealed a lower cost leap forward in Artificial Intelligence capability. Specifically, US market darling “Nvidia”, which has been at the forefront of the AI craze, tumbled ~16.9% and recorded the largest market-capitalization loss for a single stock in history. As our chart shows, the 7 US megacap tech stocks have substantially outperformed the rest of the US equity market and non-US stocks over recent years. But with valuations now stretched any vulnerabilities are likely to be pounced on and could trigger bouts of volatility. This week’s earnings announcements from firms like Microsoft and Apple will be closely monitored.
Adding to jitters was underwhelming business PMI readings out of China and US tariff-related news. The China manufacturing PMI slipped into ‘contractionary’ territory for the first time since September. Over the weekend US President Trump also abruptly announced tariffs against Colombia before abruptly reversing the decision after a deal was reached on the return of deported migrants. The moves highlight President Trump’s willingness to use tariffs as a negotiating tool for other unrelated matters.
The risk off tone triggered safe-haven demand for bonds with yields falling ~3-5bps across Europe and US rates declining ~7-10bps. The benchmark US 10yr yield (now ~4.53%) unwound last weeks grind higher to be back where it was around the start of the year. Across commodities, energy prices fell (WTI crude -2%), as did copper (-1.9%). In FX, the USD index eased due mainly to JPY strength with the market backdrop compounding Friday’s Bank of Japan rate rise and comments supporting more action down the track. USD/JPY (now ~154.65) is at a multi-week low. EUR is treading water just below ~$1.05, and GBP is around ~$1.2490. Cyclical currencies like the NZD (now ~$0.5688) and AUD (now ~$0.6284) softened a little overnight.
This week, in addition to swings in global tech stocks and any tariff developments, markets will also be focused on central bank meetings. The Bank of Canada (Weds night AEDT), US Fed (Thurs morning AEDT), and ECB (Thurs night AEDT) hand down their decisions. Another rate cut is expected from the BoC and ECB, while the US Fed should hold steady. We think signals from the US Fed that it may remain patient as it assesses the lay of the land may give the USD some renewed support, particularly if the US dataflow remains positive and/or market wobbles persist.
Global event radar: BoC Meeting (Thurs), US Fed Meeting (Thurs), EZ GDP (Thurs), ECB Meeting (Fri), US GDP (Fri), EZ CPI (3rd Feb), US ISM (4th Feb), BoE Meeting (6th Feb), US Jobs (8th Feb)
Trans-Tasman Zone
Overnight ructions in global equities, particularly the US tech-stocks which have been the main driver of the broader market, dampened risk sentiment. Bond yields, commodity prices, and cyclical currencies like the AUD (now ~$0.6284) and NZD (now ~$0.5688) have lost some ground, though the latter have held up reasonably well considering moves elsewhere. Given its positive correlation to risk assets such as US equities the AUD has underperformed on the crosses. AUD/EUR (now ~0.5990) and AUD/GBP (now ~0.5032) shed ~0.5%, while AUD/JPY (now ~97.18) has fallen ~1.1% to be back tracking where it was a week ago with overnight developments compounding the narrowing in yield differentials stemming from last Friday’s Bank of Japan interest rate rise.
Across the Tasman the NZ data calendar is light this week, while in Asia trading conditions and activity could be somewhat more subdued because of the lunar new year period. Locally, in addition to developments in the global tech space and any news regarding trade tariffs, the AUD will also be influenced in the short-term by Q4 CPI inflation (released Weds). This, along with updated staff forecasts about the outlook, will be important inputs into the RBA’s decision on 18 February. On the back of disinflation across services and housing, as well as the ongoing impact from electricity subsidies and rental assistance measures CPI looks like it softened with core inflation projected to ease to 3.3%pa. Importantly, risks also look titled to the downside given the consensus’ poor track record of forecasting inflation the past few years and improving impulses in other parts of the CPI basket.
A step down in Australian inflation should reinforce market thinking that the RBA might kick off its rate cutting cycle next month. Though with a 25bp reduction already 80% discounted, close to 3 cuts factored in by year-end, and the AUD already trading at a ~3-4 cent discount to our ‘fair value’ models, the direct and lasting drag on the currency may not be that pronounced, in our opinion. Indeed, based on the skew in expectations and lingering ‘bearish’ AUD sentiment, the larger knee-jerk impact, especially on a few of the cross-rates such as AUD/EUR where another 'dovish' ECB rate cut is anticipated this week, could come about if Q4 CPI exceeds predictions and pricing for RBA policy easing is watered down.
AUD event radar: AU CPI (Weds), BoC Meeting (Thurs), US Fed Meeting (Thurs), EZ GDP (Thurs), ECB Meeting (Fri), US GDP (Fri), AU Retail Sales (3rd Feb), EZ CPI (3rd Feb), US ISM (4th Feb), NZ Jobs (5th Feb), BoE Meeting (6th Feb), US Jobs (8th Feb)
AUD levels to watch (support / resistance): 0.6200, 0.6230 / 0.6330, 0.6360
NZD levels to watch (support / resistance): 0.5600, 0.5620 / 0.5720, 0.5770
Market Moves
Peter Dragicevich
Currency Strategist - APAC
Upcoming Events
TUESDAY (28th January)
CNY Lunar New Year
AUD Business Conditions (Dec) (11:30am)
EUR ECB Bank Lending Survey (8pm)
WEDNESDAY (29th January)
CNY Lunar New Year
USD Durable Goods Orders (Dec P) (12:30am)
USD House Prices (Nov) (1am)
USD Consumer Confidence (Jan) (2am)
NZD RBNZ’s Conway Speaks (9am)
AUD CPI Inflation (Q4) (11:30am)
THURSDAY (30th January)
CNY Lunar New Year
CAD Bank of Canada Decision (1:45am)
USD FOMC Decision (6am)
USD Fed Chair Powell Speaks (6:30am)
NZD Business Confidence (Jan) (11am)
AUD RBA’s Jones Speaks (2:20pm)
JPY BoJ’s Himino Speaks (5:10pm)
EUR Germany GDP (Q4) (6pm)
EUR Spain CPI Inflation (Jan P) (7pm)
EUR GDP (Q4) (9pm)
FRIDAY (31st January)
CNY Lunar New Year
EUR ECB Decision (12:15am)
USD GDP (Q4 A) (12:30am)
USD Initial Jobless Claims (12:30am)
EUR ECB President Lagarde Speaks (12:45am)
NZD Consumer Confidence (Jan) (8am)
JPY Tokyo CPI Inflation (Jan) (10:30am)
JPY Industrial Production (Dec P) (10:50am)
AUD Private Sector Credit (Dec) (11:30am)
EUR France CPI Inflation (Jan P) (6:45pm)
SATURDAY (1st February)
CNY Lunar New Year
EUR Germany CPI Inflation (Jan P) (12am)
CAD GDP – Monthly (Nov) (12:30am)
USD Employment Cost Index (Q4) (12:30am)
USD PCE Deflator (Dec) (12:30am)
USD Fed’s Bowman Speaks (12:30am)
USD Chicago PMI (Jan) (1:45am)
*Note, all times/dates provided are AEDT
About the author
