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The ASX200 started the week on a firm footing, closing up +0.4%, back within a few points of the psychological 8700 area. The catalyst for the solid day was news that the EU and the US had reached a trade agreement, and President Trump was looking to extend his tariff truce with China – the US S&P 500 futures buoyed sentiment, opening ~0.5% higher on the tariff news. It was another session of polarised performance with the banks strong, dragging the market higher, while the resources gave back some recent gains, and tempered overall sentiment as a result.
The last few days have seen tariff fears easing, with Japan and European deals replacing uncertainty with optimism. The focus is now going to switch to central banks with the Fed stepping up to the plate this week, although no easing is expected. As we saw earlier this month, with the RBA, market expectations do not always pan out. However, there is a solid case for a cut in September; hence, comments from Jerome Powell this week will be dissected with great precision.
We talked about the Aussie Dollar as our “Chart of the Week” on Monday, and on cue, the local battler rallied to a fresh 9-month high on optimism around global trade, although the resources didn’t pay attention this time. We see a lot more upside by the $A through 2025/6 which may impact the earnings of some ASX stocks with high $US revenue and would usually translate to a strong resources sector, but we need confidence to be less fleeting towards China recoveries, the bullish mood swings are struggling to last more than 1-2 weeks at a time.
Overseas markets were disappointing overnight after trading strongly on the futures market during Monday’s trading session. In Europe, the FTSE closed down 0.4% and the German DAX fell 1%. In the US, the S&P 500 closed little changed as the trade deal failed to spark a rally. The S&P 500 closed marginally higher after posting a new high above 6400 after the opening bell, while the Dow slipped 0.1%.
- The SPI futures are calling the ASX200 to open down ~0.7% after US indices reversed to the downside after the US-EU trade deal promised much early.
