Stocks subdued as Trump tax cuts stoke fiscal fears
Stocks have been muted and the US dollar under pressure as investors fret about the fiscal outlook for major developed economies and the lack of progress on trade deals.
Oil prices rose more than one per cent after a CNN report said Israel was preparing a strike on Iranian nuclear facilities, raising supply concerns out of the key Middle East producing region and bringing geopolitical concerns back into focus.
Investor sentiment has been fragile since Moody's last week downgraded the United States' credit rating, stoking worries about the country's $US36 trillion ($A56 trillion) debt pile, with US President Donald Trump pushing for tax cuts that could worsen the debt load by $US3 trillion to $US5 trillion.
There are also concerns about a lack of progress on US trade talks with trading partners pressing Washington to ease or eliminate its tariffs.
The STOXX benchmark of major European shares fell 0.2 per cent in early trading on Wednesday, and US stock futures indicated a lower open on Wall Street.
Treasury yields have stayed elevated, with the yield on 30-year Treasury bonds hitting five per cent.
That brought no respite to the dollar as investors flocked to safe-haven currencies including the yen and the Swiss franc.
"People are looking at the idea of moving capital out of the US and it's certainly not a mass exodus, but people are looking at the opportunities in some of these other markets again," said Chris Weston, head of research at Pepperstone.
Investors sought those opportunities in Asia, with MSCI's broadest index of the region outside Japan up 0.8 per cent at a seven-month high.
In currencies, dollar selling accelerated in Asia, driving the yen, Swiss franc and the euro to their strongest levels in two weeks.
The pound touched a three-week high and last bought $US1.3428. British inflation jumped to a higher-than-expected annual rate of 3.5 per cent in April from 2.6 per cent in March.
Markets were also monitoring the Group of Seven finance ministers' meetings under way in Canada for any hints that a weaker dollar could help advance trade negotiations.
Investors in the Japanese bond market remained jittery after a steep selloff in super-long bonds in the previous session.
Yields on longer-dated bonds hovered near record highs on Wednesday, with questions over how the country could fund new fiscal stimulus, with the central bank trying to normalise monetary policy.
Data on Wednesday showed Japanese shipments to the US fell in April even as exports rose for the seventh straight month, highlighting the toll President Donald Trump's tariffs could take on the fragile economic recovery in Japan.
Analysts said any progress on deals between the US and its trade partners could fuel risk appetite, but there are concerns Trump's policies could still damage the global economy.
On Tuesday, US Federal Reserve officials said prices were rising on the back of higher US import tariffs and counselled patience before making any interest rate decisions.
Gold prices rose on Wednesday as the dollar weakened and investors flocked to safe-haven assets.
Spot gold was 0.7 per cent at $US3,311 per ounce, the highest in more than a week.
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To learn more or book your free chat with an NGS Super Specialist call NGS Super on 1300 133 177 or go online to This is general information only and does not take into account your objectives, financial situation or needs. Before acting on this information, or making an investment decision, consider whether it is appropriate to you and read NGS's Product Disclosure Statements and Target Market Determinations. Also consider obtaining financial, taxation and/or legal advice tailored to your personal circumstances. Financial products are issued by NGS Super Pty Ltd ABN 46 003 491 487 RSE Licence L0000567 and AFSL 233 154. Market projections and predictions are based on current assumptions and are subject to change. These are not guarantees of future results. Information current as at May 13. This is branded content for NGS Super. Global tariffs have been one of the big topics dominating news headlines lately, but what does it all mean for you? In this column, NGS Super's Chief Investment Officer, Ben Squires, breaks down what's happening, the potential effect on superannuation, and how NGS Super is responding. US President Donald Trump has implemented various policies impacting the global economy, including tariffs on products imported into the US. Australia isn't exempt from the new tariffs, including on our steel and aluminium. The impact is small, less than one per cent of our exports go to the US, however, Australia can't completely escape the consequences - the effects are being felt globally, with trade slowing down, and share markets fluctuating. At NGS, our priority remains protecting and growing members' wealth with a diversified portfolio that can navigate different market environments, such as heightened volatility and equity downturns. By diversifying across asset classes, NGS does not rely solely on share markets for returns. 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Despite the sharp declines in equity markets during February, March and into April, the US S&P 500 index made a strong recovery following the announcement of a 90-day pause on tariffs. Even though this was welcomed news, there is much uncertainty on the path of tariff negotiations, and this presents more downside risk for share markets until these matters are fully resolved. We therefore continue to maintain a balanced view on risk. If you'd like to review your investment strategy, it's a good idea to speak to a financial planner. Seeking advice is a way to plan for your future, mitigate risks and make the most of your saving opportunities. Education is integral to the planning process - staying informed will help you feel more confident about your super and your retirement. You can speak to one of NGS's Super Specialists - it's complimentary, and they can answer general questions about super, investments, insurance or transition to retirement. 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While equities remain a core driver of growth, we actively manage risk through defensive strategies. Our international share portfolio declined only three per cent since February 19 to May 13, 2025, compared to a four per cent drop in the S&P 500 over the same period. To mitigate downside risk, we have a multi-asset strategy that balances equities with defensive exposures including precious metals, government bonds, hedging strategies, alternative assets and diversifiers. In recent years, we've seen strong returns from markets, and a market pullback isn't entirely unexpected. While the Diversified MySuper option posted a negative 1.5 per cent return for March and share markets fell into correction territory of around a 10 per cent fall in the start of April, the Diversified MySuper option has recovered, delivering a Financial Year To Date return of 8.84 per cent, as at May 13, 2025. 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To learn more or book your free chat with an NGS Super Specialist call NGS Super on 1300 133 177 or go online to This is general information only and does not take into account your objectives, financial situation or needs. Before acting on this information, or making an investment decision, consider whether it is appropriate to you and read NGS's Product Disclosure Statements and Target Market Determinations. Also consider obtaining financial, taxation and/or legal advice tailored to your personal circumstances. Financial products are issued by NGS Super Pty Ltd ABN 46 003 491 487 RSE Licence L0000567 and AFSL 233 154. Market projections and predictions are based on current assumptions and are subject to change. These are not guarantees of future results. Information current as at May 13.
