Australian shares are set to rebound as fears about a trade war being triggered by United States President Donald Trump began to ease.
Markets at 8:10am (AEDT):
- ASX SPI 200 futures +1.1pc, ASX 200 (Monday’s close) -0.6pc at 5,895
- AUD: 77.6 US cents, 56.08 British pence, 62.94 Euro cents, 82.42 Japanese yen, $NZ1.07
- US: Dow Jones +1.4pc at 24,874, S&P 500 +1.1pc at 2,721, Nasdaq +1pc at 7,331
- Europe: FTSE +0.7pc at 7,116, DAX +1.5pc at 12,091, Euro Stoxx 50 +1.1pc at 3,360
- Commodities: Brent crude +1.9pc at $US65.60/barrel, spot gold -0.2pc at $US1,319/ounce, iron ore -1.7pc at $US77.03/tonne
Trade war fears subside
Wall Street traded sharply higher after four days of losses, with the Dow Jones index up 1.4 per cent to 28,874 points.
The S&P 500 and Nasdaq have each gained at least 1 per cent.
It seems investors are viewing Mr Trump’s tariff threats — to impose hefty tariffs on imported steel and aluminium — as a negotiating tactic, rather than a done deal.
He is also facing mounting pressure to hold off on his threat by senior members of the Republican Party.
US House Speaker Paul Ryan has urged the Trump administration not to proceed with the tariffs, warning it could hurt the US economy.
But Mr Trump remained defiant, according to comments made during a White House meeting with Israeli Prime Minister Benjamin Netanyahu.
“We’re not backing down,” Mr Trump said.
“I don’t think you’re going to have a trade war,” he added, without elaborating.
The US President has touted the tariffs as a way to protect local jobs, and revive the US steel and aluminium industries.
Despite his comments, Mr Trump’s tweets on Monday suggested he may open the door for tariff negotiations.
Mr Trump tweeted: “We have large trade deficits with Mexico and Canada. NAFTA, which is under renegotiation right now, has been a bad deal for USA. Massive relocation of companies & jobs.
“Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed.”
As a sign of reduced market anxiety, the CBOE Volatility index (VIX) has dropped by 6.6 per cent to 18.29.
In addition, Harley-Davidson stocks rose 2.3 per cent.
Over the weekend, the European Union threatened to impose tariffs on Harley-Davidson motorcycles if Mr Trump proceeds with his tariff threats.
“There has been a lot of conflicting information in terms of [the administration’s] plans and it’s leading to some back and forth movement in the market,” said Rick Meckler, president of LibertyView Capital Management.
“Nobody wants to take a big position to sell, only to find the administration change its mind.”
RBA decision and retail sales
The Australian dollar is steady at 77.6 US cents, though it has fallen against the British pound (-0.3pc) and euro (-0.1pc).
In economic news, the Reserve Bank board will meet today to discuss monetary policy and interest rates.
The RBA is expected to keep the official cash rate on hold at 1.5 per cent — just it has done for the past 1.5 years due to concerns about weak wages growth, high household debt, and below-target inflation.
“One suspects the RBA statement shouldn’t deviate too greatly from the prior statement,” IG Markets’ chief market strategist Chris Westonsaid.
He also said it “should not be a volatility event and it seems unlikely that rates pricing will alter too greatly either.”
Also out today are the January retail figures from the Bureau of Statistics (ABS), with the market expecting a 4 per cent increase.
Furthermore, the ABS will release fourth-quarter data on Australia’s current account — the difference in value between imports and exports.
Reuters-polled economists are anticipating a $12.6 billion deficit.