Source : THE AGE NEWS
A shortened week of relative calm is expected on the Australian sharemarket but traders will be on “Trump watch” as they digest the prospect of a global recession resulting from the US president’s erratic approach to economic policy.
The sharemarket is set to open slightly higher, with futures pointing to a rise of 47 points, or 0.6 per cent, at the open. The local bourse closed higher on Thursday, buoyed by energy stocks, gold miners and consumer staples. The ASX was closed on the Good Friday and Easter Monday public holidays and this week will open for three days of trading, closing on Friday for Anzac Day.
The ASX will reopen on Tuesday after the Easter long weekend.Credit: Getty Images
“I suspect, as we have been for the last month or two, we’ll be on Trump watch,” says Stephen Miller, investment strategy consultant at GSFM. “We have seen some mitigation of the ‘Liberation Day’ announcements. But they’ve been just that – mitigation, not eradication,” Miller says.
Companies and investors are grappling with an aggressive tariff landscape poised to keep shifting and fuelling worries about a recession as US President Donald Trump’s administration negotiates with a range of countries. While he has paused some of the heftiest levies on imports, the US is also locked in an escalating trade battle with China, the world’s second-largest economy.
Beijing warned nations against making trade agreements with Washington that hurt China, highlighting how economies around the world risk getting caught up in tensions between the two powerhouses.
US Vice President J.D. Vance arrives in New Delhi on Tuesday (AEST) as the US threatens to increase the 10 per cent tariffs on Indian exports to 26 per cent if no deal is reached by the end of the 90-day pause Trump put in place this month.
“The prospects of a global recession are growing, and I think they’re trying to calibrate what that might imply for markets. Personally, I’m a little on the pessimistic side. I suspect that the prospects of a recession this year are greater than 50 per cent,” Miller says.
Closer to home, preliminary April PMI data for Australia will be released on Wednesday. These reports will provide an initial look at the impact of reciprocal tariffs on manufacturing and services sectors.
“In the current environment, I think the PMIs will have greater effect if they show declining activity, which will be attributed to the tariff announcements,” Miller says. “But I suspect it might be too early to see any real impact in those numbers.
“I think if we do see some weakness in those PMIs, that speaks louder than some form of resilience. Because that means that the market hasn’t got its head around the enhanced prospects of recession this year.”
The fallout from Trump’s reciprocal tariff announcements is expected to continue. Credit: Bloomberg
Shane Oliver, head of investment strategy and chief economist at AMP, says Australia’s election on May 3 will also continue to “bubble away in the background”.
“You could argue that the Coalition is probably going to spend a bit more in the short term … Labor a bit more in the longer term,” he says. “But whoever wins, we’re certainly facing pretty big budget deficits.”
In the US, a heavy slate of company results in the coming week will test a sharemarket shaken by the US trade policy overhaul that upended the outlook for the global economy and corporate America.
Investors remain on edge after Trump’s sweeping April 2 tariff announcement stunned markets and sparked some of the most volatile trading since the onset of the pandemic five years ago.
Heavy selling lashed Wall Street anew Monday, with longer-dated Treasuries joining stocks and the dollar in a deepening slump, after President Donald Trump’s rejection of Jerome Powell’s interest-rate policy sowed angst among investors already coping with a global trade war.
Trump’s assurances that tariff talks were progressing did little to stop the rout. The S&P 500 and other major US stock indexes tumbled around 3 per cent each in light trading, while a gauge of the dollar weakened to a 15-month low. The benchmark 10-year fell with the yield reaching 4.4 per cent. As investors turned away from US securities, haven assets climbed. Gold jumped to another record, above $US3400 an ounce, while the Swiss franc gained more than 1 per cent against the dollar.
“The Fed’s independence is seen as critical to keeping inflation expectations under control and keeping bond yields down,” Oliver says.
“Concerns have shown up in higher bond yields and a weaker US dollar. The delay in the reciprocal tariffs [has] relaxed that momentarily, but those concerns are still there. And if [Trump] threatens the Fed’s independence, then those concerns I think would become magnified.”
Against a basket of currencies, the US dollar slid to a three-year low of 98.267 cents on Monday. The Australian dollar hit a two-month high of US64.02¢.
Elon Musk’s electric vehicle maker Tesla, which reports results on April 22, will be in the spotlight this week in part because of the billionaire’s close ties to Trump.
Boeing’s results are also in focus, after China reportedly ordered its airlines not to take further deliveries of the plane maker’s jets. IBM, Merck, Intel and Procter & Gamble are among the major US companies set to post results in the coming week.
Investors will be hoping that the heart of earnings season can restore more calm to markets.
With Reuters, Bloomberg
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