ASX jumps after Donald Trump backs down on tariffs ahead of the "Christmas season"



14 August 2019 08:31:13

Australian stocks are about to rebound this morning after US President Donald Trump withdrew his plan to impose additional tariffs on some Chinese goods from September 1.

Market snapshot at 7:50 am (AEST):

  • ASX SPI futures + 0.7% at 6.540, ASX 200 (closing on Tuesday) -0.3% at 6.569
  • AUD: 67.96 US cents, 56.35 British cents, 60.83 euro cents, 72.53 Japanese yen, $ NZ, 05
  • United States: Dow Jones + 1.4pc at 26.280, S&P 500 + 1.5pc at 2.926, Nasdaq + 2pc at 8.016
  • Europe: FTSE 100 + 0.3pc to 7.251, DAX + 0.6pc to 11.750, CAC + 1pc to 5.363, Euro Stoxx 50 + 0.9pc to 3.357
  • Raw materials: Crude oil + 4.1% at USD 60.94 / barrel, spot gold -0.7% at USD 1.501,14 / ounce, iron ore -5.2% at USD 89.25 / ton

Trump's decision to turn back pushed Wall Street and the European markets up sharply during the night as investors, retailers and technology companies breathed a sigh of relief.

Instead, the additional levy on thousands of consumer products imported from China – including cell phones, laptops, video game consoles, toys and some clothing and footwear – will now come into effect on December 15th.

"We're doing it for the Christmas season, in case some of the rates would have an impact on US customers," Trump told New Jersey journalists.

"In the event that they can have an impact on people, what we have done is that we have delayed so that they are not relevant to the Christmas shopping season."

The Office of the United States Sales Representative (USTR) has published a list of 21 pages of products that will not be affected by tariffs until mid-December.

These include baby monitors and strollers, microwaves, instant printed video cameras, bells, high chairs, musical instruments, ketchup dispensers, baby diapers, fireworks, sleeping bags, cribs, fishing reels, paint rollers and foodstuffs.

In addition, a separate group of products will be entirely free of charges, "based on health, safety, national security and other factors," said USTR.

Some products are still affected by September rates

However, the Trump administration still plans to impose 10% tariffs on food, clothing and other Chinese consumer electronics from September 1.

This includes Apple and Fitbit smartwatches, Amazon smart speakers, Google and Apple and Bluetooth headphones

Also remain in the list of September rates live animals, dairy products, skis, golf balls, contact lenses, motorcycle engines, lithium ion batteries, snow plows, various types of steel and some clothing items – including coats, men's suits and swimsuits.

Overall, these exemptions, combined with new talks with China, suggest that the US president might be willing to compromise.

Trump's decision to blink has also rekindled investors' hopes of a US-China trade deal and that a recession so feared by a long trade war could be avoided.

Your announcement comes amid growing concerns over a global economic slowdown.

The investment bank Goldman Sachs said on Sunday that fears of a US-China trade war leading to a recession are on the rise and that it no longer expected a trade agreement between the two countries before the 2020 presidential election.

Apple leads a major rally

The Dow Jones index closed 373 points more, with an increase of 1.4 percent to 26,280.

The broader S&P 500 rose 1.5 percent and the heavy NASDAQ jumped 2 percent.

Wall Street received a strong boost from Apple shares, which increased by 4.2% as iPhone and MacBook sales would be saved by the new tariffs for the moment.

The delay in the imposition of tariffs offers some relief to retailers.

However, most stores would supply the holiday goods before the September deadline, some may have faced charges for filling orders late in the Christmas shopping season.

Trump announced September 1 rates less than two weeks ago, blaming China for not following promises to buy more American agricultural products during talks in Shanghai at the end of July.

Since then, the S&P benchmark in New York has fallen by over 4%.

ASX to rebound

At 7:20 am (AEST), ASX futures had risen by 48 points, or 0.7 percent.

This indicates that the local stock market should follow the strong advantage of the Wall Street night rally.

The Australian dollar, meanwhile, has recovered to 67.96 US cents.

In the local economic news, the Statistical Office will publish its wage price index in the June quarter.

Economists interviewed by Reuters expect Australian wages to have increased by 0.5 percent over the three months, bringing the annual increase to 2.3 percent.

Overall wage pressures in the economy remain modest and further tightening of the labor market will be needed to increase wage pressures with tomorrow's probably more sensitive job press, "said Tapas Strickland, director of the NAB economy.

Meanwhile, the Commonwealth Bank economist Kim Mundy believes: "The low wage inflation, combined with a sticky unemployment rate of around 5.2%, suggests that the RBA (Reserve Bank) will produce a third rate cut in 2019 ".

ABC / Reuters



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First published

August 14, 2019 07:41:02

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