The Australian share market has bounced back after Donald Trump‘s chief economic advisor hinted the US may reconsider its trade war with China.
The benchmark S&P/ASX200 was 1.5 per cent firmer during the first two hours of Wednesday trade, as the United States also signalled possible trade deals with India and Japan.
A possible thawing in trade tensions has also pushed the Australian dollar above 64 US cents for the first time in almost five months, just a fortnight after sinking to Covid lows.
While the stock market is still well below February’s record high peak, the 7,947-point level reached before lunchtime was the highest since late March, before the Trump Administration announced a series of broad-based tariffs, including 10 per cent on Australia.
This had led to a trade war with China, Australia’s biggest trading partner, which saw the United States impose 145 per cent tariffs on its key geopolitical rival as part of a tit-for-tat manoevre.
Australia’s share market and superannuation balances, in the first week of April, had suffered the biggest falls since the start of Covid in March 2020, but the worst may be over.
Moomoo market strategist Jessica Amir said US Treasury Secretary Scott Bessent’s hint of new trade deals, including with China, had buoyed Wall Street on Tuesday night, in turn helping the Australian market.
American Vice President JD Vance has also hinted at trade pacts with India and Japan.
The Australian share market has bounced back after Donald Trump hinted he would reconsider some of his more punitive import tariffs on China
‘Firstly, there’s hope the White House will seal trade deals with top economic partners,’ Ms Amir said.
Mr Bessent told a private audience in Washington DC a continuing trade war between the US and China, the world’s two biggest economies, was unsustainable.
‘I do say China is going to be a slog in terms of the negotiations,’ he told the JPMorgan Chase function in remarks cited by Associated Press.
‘Neither side thinks the status quo is sustainable.’
Australia’s mining giants, which heavily export to China, had big gains on Wednesday, as tech stocks soared a fortnight after a bloodbath.
BHP saw its share price surge 2.99 per cent to $37.60 as Rio Tinto climbed 2.37 per cent to $114.26 and iron ore player Fortescue Metals Group rose 2.74 per cent to $15.36.
Tech stocks, that took a hammering a fortnight ago, were also making a comeback with ZipCo up 2.65 per cent to $1.55 as Life360 soared 6.25 per cent to $20.57.
‘Despite all the noise, investors should remember that after every market crash we’ve seen recovery – across the S&P 500, the Nasdaq, and the ASX 200,’ Ms Amir said.
The benchmark S&P/ASX200 was 1.5 per cent firmer during the first two hours of Wednesday trade as investors took heat from the Trump Administration looking to sign trade deals (US President Donald Trump is pictured in front of a portrait of a Republican predecessor Ronald Reagan)
‘Tech stocks have often fallen the hardest but seen the strongest rallies on the way back up.’
The share market also took heart from Trump backing down on a threat to fire US Federal Reserve chairman Jerome Powell, giving investors some short-lived confidence that American interest rate settings could continue to be independently determined without political interference.
Overseas travellers are also in for an easier time with the Australian dollar back at 64 US cents for the first time since early December, only a fortnight after sinking to a five-year low of 59 US cents.
The Australian dollar’s fortunes traditionally fluctuate on global risk appetite, given commodities like iron ore and coal are Australia’s biggest exports.
But Westpac currency strategists Richard Franulovich Kaitlyn Buhariwalla said the Australian dollar’s move above 64 US cents on Tuesday afternoon had more to do with US dollar weakness, with investors nervous about Trump undermining the US Fed chief.
‘The move came amid another round of heavy US dollar selling at the start of the week after President Trump ramped up his criticism of Fed chair Powell,’ they said.
‘Trump, of course, frequently blasted Chair Powell in his first term.
‘But this time around his complaints are landing more heavily.
‘Global investor confidence in the US is already on shaky grounds.’
