Australian Stocks Spike as Investors Urge Caution
Synopsis
Global financial markets around the world are rallying after President Dinald Trump announced that he would pause tariffs for 90 days. The pause includes every country excluding China. Australia and New Zealand will remain…
Global financial markets around the world are rallying after President Dinald Trump announced that he would pause tariffs for 90 days. The pause includes every country excluding China. Australia and New Zealand will remain subject to the baseline 10% tariff. The news caused Australian stocks to jump in price. The ASX 200 closed up 4.5 % translating to over 100 million AUD rise in just one day. However, that is still down from last week. Thus investors and analysts remain cautious due to the unpredictable nature of the current US administration.
Mining and the Australian Dollar Recover
The rally was led by mining companies BHP and Rio Tinto with both stocks climbing over 5%. These companies were previously under pressure due to fears of reduced commodity demand in a potential global recession.
The Australian dollar similarly saw a big recovery climbing to US 61.8c by the end of the day after coming close to dropping below the 59c mark earlier in the week.
Despite these positive signs it is important not to get ahead of ourselves. The tariffs have been paused, not cancelled. Also Australia is still subject to a 25% levy on steel and aluminum exports to the US.
David Bassanese, the chief economist at Betashares, told investors that the global economy “faces enormous risk in the weeks and months ahead” and that the bounce may be a “cruel bear market” rally. Whether Australian stocks will continue to rise is very uncertain in the current climate. The close intertwining of Australia’s economy with that of China is a source for concern. As President Trump turns his attention towards the world's second largest economy. As the two nations square up for a possible all out trade war.
Sources
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