Wall Street rebounds; Gold, silver swing; Oil dives; ASX set to rise on RBA day
Stan Choe
Updated ,first published
The wild swings in financial markets overnight eased as trading turned westward on Wall Street on Monday. US stocks rose after sharp declines in Asia followed by gains in Europe, while gold and silver prices rebounded from previous heavy losses.
The S&P 500 gained 0.6 percent and is on track to break its three-day losing streak. The Dow Jones gained 439 points, or 0.9 percent, and the Nasdaq composite rose 0.8 percent.
The Australian stock market is set to rise further, with futures pointing to a gain of 95 points, or 1.1 per cent, at the open. The ASX lost 1 per cent on Monday. The Reserve Bank announces its interest rate decision at 2.30pm (AEDT) today and markets are predicting a quarter point increase, the first increase in more than two years. The Australian dollar was trading at 69.47¢ at 5.10am AEDT.
On the other hand, Donald Trump announced that the USA and India reached a trade agreement that reduced customs duties on Indian goods, reducing tensions between the two countries.
Trump said on Monday he would reduce 25 percent tariffs on Indian goods to 18 percent after Prime Minister Narendra Modi agreed to halt purchases of Russian oil during a phone call. This move provides significant relief to New Delhi, which has been trying to negotiate a lower interest rate with Washington for months. India sends almost a fifth of its total exports to the United States, and Trump’s 50 percent tariff was the highest imposed on products of any major trading partner.
Shares of companies that make computer storage led Wall Street, extending gains last week following several profit reports that beat analysts’ expectations. Airlines and cruise ship operators were also strong, benefiting from the sharp decline in oil prices.
The focus of the movement in financial markets was again precious metals; After the price of gold roughly doubled in just 12 months, the momentum came to an abrupt halt.
Gold briefly fell below $4,500 per ounce overnight; It has fallen by over $1,000 from its highest point reached last week. It later erased its loss since Friday and subsequently fell 0.3 percent to $4730.50.
The silver price has been on an even wilder ride lately, jumping from a 9 percent loss to a 1.2 percent gain overnight.
Gold and silver prices were rising as investors sought safer things to own amid a wide range of concerns, including a Federal Reserve that could become less independent, a U.S. stock market that critics say is overpriced, tariff threats and heavy debt burdens on governments around the world.
Prices fell on Friday, including silver’s 31.4 percent drop. Some on Wall Street saw this as a result of President Donald Trump nominating Kevin Warsh as the next chairman of the Federal Reserve. Warsh’s reputation as a former Fed chairman may have raised expectations among some investors that he might keep interest rates high to combat inflation, reducing the need to hide in gold and silver for protection.
But many on Wall Street are also skeptical of that initial reading, saying Trump’s expectation that Warsh will lower interest rates is something the president has demanded. This can stimulate the economy and also increase inflation.
The Fed chairman has a huge influence on the economy and markets around the world, helping determine where the U.S. central bank directs interest rates. As the Fed tries to keep the US job market moving without letting inflation get out of control, this affects the prices of all kinds of investments.
The recent swoon in gold and silver may be related to a debacle by some traders who borrowed money to bet that metal prices would continue to rise, rather than a wholesale change in expectations for metal demand, according to Darrell Cronk, chief investment officer of Wells Fargo’s Wealth and Investment Management.
Sandisk rose to leadership in the S&P 500 with a 15 percent increase on Wall Street. The data storage company extended its 6.9 percent gain on Friday after reporting stronger profits than analysts expected in its latest quarter. He credited, among other things, the demand created by the artificial intelligence boom.
That helped offset a 1.1 percent decline for Nvidia, whose chips are driving much of the world’s transition to AI technology. Losses were even worse in Asia, where AI winners fell. South Korea’s Kospi fell 5.3 percent from record, its worst day in almost 10 months, after chip company SK Hynix lost nearly 9 percent.
Walt Disney Co. fell 4.2 percent even though the entertainment giant reported stronger profit than analysts expected in its latest quarter. Among other things, he warned of the difficulties of keeping international visitors away from U.S. theme parks.
Oil prices fell more than 4 percent after Trump told reporters that Iran was “seriously talking to us.” This is a potential signal of improving relations between the two countries, which could prevent a possible disruption in global oil flows.
This could mean less painful fuel bills for airlines and cruise lines. Carnival was up 7 percent and United Airlines was up 4.8 percent.
In the bond market, Treasury yields rose slightly following a report that said U.S. manufacturing was rising at a time when economists expected a contraction. The yield on the 10-year Treasury note erased an earlier decline, rising to 4.27 percent from 4.26 percent at the end of Friday.
In stock markets abroad, European indices rose about 1 percent following the crash in Asia. While Japan’s Nikkei 225 index fell 1.3 percent, it fell 2.2 percent in Hong Kong and 2.5 percent in Shanghai.
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The Market Summary newsletter is a summary of the day’s transactions. Let’s each take ittoday afternoon.
