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The Australian share market has rallied following an announcement from former President Donald Trump indicating a potential reconsideration of his previously stringent tariff policies against China. In early Wednesday trading, the benchmark S&P/ASX 200 index surged by 1.8 percent, reversing recent losses triggered by escalating trade tensions between the US and China. Jessica Amir, a strategist at Moomoo market, credited the market’s buoyancy to statements from US Treasury Secretary Scott Bessent.
He hinted at the possibility of new trade deals, including with China, which has rejuvenated investor confidence. On Tuesday night, Wall Street experienced similar gains, further bolstering the Australian market. “The hint of trade deals with top economic partners has instilled hope.
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Bessent’s remarks have provided a much-needed boost to the market,” Amir said.
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Trump’s announcement comes amidst intense scrutiny over his administration’s trade policies, which had previously led to a tariff war with China. This conflict saw the US imposing up to 145 percent tariffs on Chinese goods.
The move wreaked havoc on global markets, including Australia’s, which experienced significant volatility. China remains Australia’s largest trading partner, and renewed trade optimism significantly boosted sectors such as mining and technology.
asx rebounds on trade optimism
On Wednesday, shares of major exporters posted substantial gains. BHP’s share price rose by 2.99 percent to $37.60, Rio Tinto climbed 2.37 percent to $114.26, and Fortescue Metals Group increased by 2.74 percent to $15.36. In the tech sector, which had suffered a severe downturn two weeks prior, stocks made a remarkable recovery.
ZipCo’s shares surged by 2.65 percent to $1.55, while Life360 saw a huge leap of 6.25 percent to $20.57. Despite the market rally, some analysts remained cautious. They cautioned that while short-term gains were positive, the long-term sustainability of market growth depended heavily on the actual outcomes of the proposed trade negotiations between the US and China – the world’s two largest economies.
In the currency market, the Australian dollar managed to climb above 64 US cents for the first time in nearly five months, recovering from a previous drop to Covid-era lows. This recovery was partially attributed to a weaker US dollar, as investors expressed concern over Trump’s criticism of Federal Reserve Chairman Jerome Powell, sparking fears about potential political interference in monetary policy. Westpac currency strategists Richard Franulovich and Kaitlyn Buhariwalla noted that the Australian dollar’s rise was largely due to diminishing confidence in the US dollar.
“The US dollar faced another round of heavy selling at the start of the week as President Trump’s criticism of Fed Chair Powell intensified,” they explained. As global investor confidence wavers and the international community watches closely, the Australian market’s recovery remains a testament to the enduring impact of geopolitical developments on financial markets.
