Australian shares opened higher following yesterday’s broad sell-off, gaining 30.10 points or 0.36% to 8,409.50 after trading kicked off.
Trump tariff reprieve for now
It appears to be a game of ‘will-he, won’t-he’ that markets should brace for over at least the next four years.
Over the weekend, Trump imposed tariffs of 25% on imports from Mexico and close ally Canada, and 10% on China, acknowledging the measures may cause ‘short-term’ economic pain for Americans.
The next day, Wall Street recovered its Trump-induced losses and closed off its session lows after the US president announced a one-month stay of execution on the tariffs he plans to impose on Mexico and Canada.
The Australian dollar also responded well to the news of Canada’s likely reprieve.
Megacap tech stocks drop
The Magnificent Seven megacap stocks declined with Apple, Nvidia and Tesla losing between 2.8% and 5.2%. Tyson Foods rose 2.2% after raising its annual sales forecast.
The Dow Jones Industrial Average fell 123 points or 0.3% after being down as much as 665 points earlier in the day. The S&P 500 dropped 0.8% while the Nasdaq Composite shed 235.5 points or 1.2%.
European sharemarkets saw their largest one-day decline in more than a month as automakers led losses over fears of escalating trade tensions. Porsche, BMW, Mercedes-Benz and Stellantis were in the red, contributing to a 2.2% sectoral decline.
China-exposed luxury goods makers LVMH and Kering also fell 1.9% and 3.8%, respectively. Basic resources stocks dropped 1.1% before recovering as metal prices stabilised. The FTSEurofirst 300 index declined 0.8%, while the UK's FTSE 100 lost 1.0%.
In economic data, US construction spending increased 0.5% in December, surpassing forecasts of a 0.2% rise.
The S&P Global Manufacturing PMI improved from 49.4 in December to 51.2 in January, while the ISM Manufacturing Index climbed to 50.9, its highest level since September 2022.
US government bond yields fell amid volatile trading as investors sought safety in Treasury securities. The 10-year Treasury yield declined by three basis points to 4.53%, while the 2-year yield edged up by one basis point to 4.25%.
Currencies and commodities
The US dollar weakened against major currencies. The euro rose from US$1.0214 to US$1.0329, settling near US$1.0290 at the US close. The Australian dollar strengthened from US$0.6114 to US$0.6195, while the Japanese yen firmed to JPY154.70 per US dollar.
Oil prices edged higher in volatile trade but closed at a one-month low. Brent crude gained US$0.29 or 0.4% to US$75.96 per barrel, while US Nymex crude added US$0.63 or 0.9% to US$73.16 per barrel.
Base metal prices rebounded, with copper futures rising 0.8% and aluminium up 1.2%. Gold prices gained on safe-haven demand, with futures climbing US$22.10 or 0.8% to US$2,857.10 per ounce.
Spot gold hit a record high of US$2,830.49 before settling near US$2,816 at the US close.
Iron ore futures declined by US$0.76 or 0.7% to US$105.02 per tonne as concerns over a potential trade war weighed on market sentiment.