Australian shares shoot up after Trump walks back tariff threat | Australian economy
Australian shares rose on Thursday to recoup some of their recent losses after Donald Trump withdrew his tariff threat against European allies amid a pressure campaign to seize control of Greenland.
The easing sparked a rally in global equity markets that trickled into Australia, with the benchmark S&P/ASX 200 index briefly rising above 8,860 points before easing slightly.
The US president’s retreat has once again rewarded dip buyers who implemented the “Trump is Always Afraid” (or TACO) trade strategy, which relies on the American leader backing away from tariff threats after declaring victory.
Trump said he had “the framework for a future agreement” on Greenland, without elaborating.
But, in an interview Speaking to Sky News on Wednesday, Sascha Faxe, a member of the Danish parliament, claimed that the agreement that Donald Trump claimed to have reached with NATO on Greenland was “not real”.
“The thing is, you can’t get a deal done without first including Greenland as part of the negotiations,” Faxe said.
Experienced financial markets commentator Michael McCarthy said that after the recent easing of geopolitical tensions, “all arrows are pointing up as risk increases in the market.”
“We’ve seen a lot of things in the past that could have triggered a very significant correction in the stock market, but investors didn’t care,” said McCarthy of online trading platform Moomoo.
McCarthy cites the outbreak of inflation, a significant rise in geopolitical tensions and the risk of a sell-off in US bonds as potential triggers for a sustained global equity correction.
The sale of US bonds will signal that investors have lost confidence in US political and economic policies, and this will be reflected in global markets.
Chris Weston, head of research at Melbourne-based financial firm Pepperstone, said investors would want to know more about Trump’s framework agreement on Greenland’s future before fully reducing further risk in Europe.
“However, it may not be entirely straightforward; many people will want to see in the details of the agreement and the finer details of any agreement, what is actually at stake and how the agreement is worded from the European side,” Weston said.
Australia’s mineral-heavy share market has been supported by strong commodity prices, with iron ore demand proving resilient and gold and copper trading near record levels.
At the same time, sticky inflation and the growing expectation of interest rate hikes in the near term have capped stock market gains.
ASX momentum paused on Thursday following the release of the Australian jobs report, which showed a rise in employment, raising the prospect of a rate hike as early as next month.
Rising rates are generally bad for stocks, given that borrowing costs rise and rival investments like bonds become more attractive.
Australia’s benchmark index rose about 0.6% in afternoon trading on Thursday, representing a market value of about $17 billion and recouping about half of the losses it suffered last week.
The Australian dollar hit a 15-month high against its US equivalent, trading near US68c.
